![The Invisible Forces Weekly: Economics with a Broader View] (Cumulative 261-Present)](http://data.docslib.org/img/1b3f8f07bf85bceac8e3e3daddc1d0b9-1.webp)
[The Invisible Forces Weekly: Economics with a Broader View] (Cumulative 261-present)
Welcome! This is the article list for the cumulative (261-present) mailings of The Invisible Forces Weekly. The dates given are typically publication dates, although that practice breaks down where magazines that are published monthly or weekly are concerned. In such cases I have preserved the temporal order when the article appeared but provided the publication date. Hopefully, this will not be confusing.
The idea of the invisible forces stems from Adam Smith's The Wealth of Nations (1776). Smith wrote about the unintended consequences of "the invisible hand." However, this idea was generalized by economist David Colander as "the invisible forces" (Microeconomics, 2nd ed. (1995), pp. 17-19). It is this broader view of economics that I wish to illustrate in the articles that follow.
According to Colander, with some adaptation:
the invisible hand refers to economic forces that influence human behavior
the invisible foot refers to legal and political forces that influence human behavior
the invisible handshake refers to social and historical forces that influence human behavior
Simply put, the invisible hand, the invisible foot, and the invisible handshake comprise a system of forces that influence human behavior, in particular, the human behavior that gets reported in the media and is the object of this email. This behavior, of course, takes place in a physical environment, and influences the physical environment, so environmental matters will make their appearance, too.
Caveat. Some of the links referenced may no longer be accessible, as some of them require subscriptions. In that case I suggest a search on the article title (including the quotation marks). Usually this will result in ready access to the article in question.
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[The Invisible Forces Weekly: Economics with a Broader View] 261 (20 April 2016)
(14 April 2016): “How the Maker of TurboTax Fought Free, Simple Tax Filing” (https://www.propublica.org/article/how-the-maker-of-turbotax-fought-free-simple-tax-filing)
------“Imagine filing your income taxes in five minutes—and for free. You’d open up a pre-filled return, see what the government thinks you owe, make any needed changes and be done. the miserable annual IRS shuffle, gone. It’s already a reality in Denmark, Sweden and Spain. . .. Advocates say tens of millions of taxpayers could use such a system each year, saving them a collective $2 billion and 225 million hours in prep costs and time, according to one estimate. The idea, known as ‘return-free filing’ . . . has been around for decades and has been endorsed by both President Ronald Reagan and a campaigning President Obama. So why hasn’t it become a reality? Well, for one thing, it doesn’t help that it’s been opposed for years by the company behind the most popular consumer tax software— Intuit, maker of TurboTax. . .. Intuit has spent about $11.5 million on federal lobbying in the past five years—more than Apple or Amazon. Although the lobbying spans a range of issues, Intuit’s disclosures pointedly note that the company ‘opposes IRS government tax preparation.’”
********Evidently, California has a limited system of return-free filing called ReadyReturn. But with a limited marketing budget, “Fewer than 90,000 California taxpayers used it last year.”
(16 April 2016): “Schumpeter: Keeping it under your hat” (http://www.economist.com/news/business- and-finance/21696911-tech-fashion-old-management-idea-back-vogue-vertical-integration-gets-new)
------“Apple and Tesla are two of the world’s most talked-about companies. They are also two of the most vertically integrated. . . . A century ago this sort of vertical integration was the rule: companies integrated ‘backwards’, by buying sources for raw materials and suppliers, and ‘forwards’, by buying distributors. . . . Today this sort of bundling is rare . . . Yet a growing number of companies are having second thoughts.” Although this is most visible in information technology, other areas are also embracing it. There are five principal reasons for the turnaround: simplicity, the challenges of operating on a technological frontier, the importance of customer relationships, speed, and geopolitical uncertainty. But “vertical integration will not sweep all before it. For the most mundane products the logic of contracting out still reigns supreme. . . . That said, striking the right balance between doing things in-house and contracting out is clearly much more complicated that it was in the days when Tom Peters and his fellow gurus told companies to focus on what they do best and outsource the rest.”
********One challenge of long-supply chains is that they are subject to disruption from geological events, as most recently illustrated by the article “Japan Earthquakes Rattle Toyota’s Vulnerable Supply Chain” [SR](http://www.wsj.com/articles/japan-earthquakes-rattle-toyotas-supply-chain- 1460986805). “Toyota’s decision to shut 26 car assembly lines this week nationwide due to production halts by a supplier shows how the auto maker’s lean manufacturing system, often viewed as a model of efficiency, can be affected by disasters.” 3
********It appears the reference to Tom Peters relates, ultimately, to In Search of Excellence (http://www.amazon.com/Search-Excellence-Americas-Best-Run-Companies/dp/0060548789/), which was first published in 1982. In trying to identify the work, I stumbled upon an interesting post: “What Five Great Economists Can Tell Us About Outsourcing” (http://www.supplychain247.com/article/what_five_great_economists_can_tell_us_about_outsourcing) . The economists—Adam Smith, Ronald Coase, Robert Solow, John Nash, and Oliver Williamson— are well chosen. Evidently Peter Drucker is most-closely connected to the statement “Do what you do best, and outsource the rest.” A sense of this thought and some of its consequences appeared in The Wall Street Journal in his 1989 article “Sell the Mailroom” (http://www.wsj.com/articles/SB113202230063197204). He concludes the article, noting “Of course there is a price for unbundling. If large numbers of people cease to be employees of the organization for which they actually work, there are bound to be substantial social repercussions.” Perhaps we are seeing those repercussions this election cycle.
********The foregoing all seems to have some relevance for the review of Connectography, by Parag Khanna in “Made Everywhere and Nowhere” [SR](http://www.wsj.com/articles/made-everywhere- and-nowhere-1461021225). As there noted, “These are dark days for supporters of globalization. Bernie Sanders and Donald Trump have upended the U.S. presidential race by championing protectionism . . . [and] Hillary Clinton has renounced her former support for the Trans-Pacific Partnership.” Connectography is “a counter-blast to such thoughts. . . . Mr. Khanna argues that the most important fact about the modern world is the rise of connectivity. Countries and companies have been building bridges, digging tunnels, constructing airports and laying fiber at a breathtaking pace, soldering the world ever-closer together.” All things considered, “Mr. Khanna has succeeded in demonstrating that the forces of globalization are winning the battle for connected space, building tunnels, bridges and pipelines at an astonishing pace. He is less successful in demonstrating that they are winning the battle for people’s minds, let alone their souls.” We are left with the question, I suppose, “What is a more connected world for?”
(17 April 2016): “How Asheville’s Big Beer Deal Fell Flat” (http://www.citizen- times.com/story/news/local/2016/04/16/how-ashevilles-big-beer-deal-fell-flat/82888810/)
********I am resisting the temptation to summarize this excellent article. It is well worth the read and provides many opportunities to learn for those who are so inclined. I hope that all of our present and prospective elected officials will be so inclined.
(20 April 2016): “Marijuana Legalization in New England Is Stalled by Opiate Crisis” (http://www.nytimes.com/2016/04/20/us/marijuana-legalization-in-new-england-is-stalled-by-opiate- crisis.html)
------“First came Colorado and Washington. Then Alaska, Oregon and Washington, D.C. Now advocates for legal marijuana are looking to New England, hoping this part of the country will open a 4
new front in their efforts to expand legalization nationwide. But this largely liberal region is struggling with the devastating effect of opiate abuse, which is disrupting families, taxing law enforcement agencies and taking lives. And many lawmakers and public officials are balking at the idea of legalizing a banned substance, citing potential social costs.” A major stumbling block in legalization effort is “the opiate crisis, in which heroin, fentanyl and other drugs have killed more than 2,000 people in New England in the last year.” At the same time, legalization advocates “are using the heroin crisis as an argument in favor of legalization, saying that it would move the substance out of the hands of trackers” and reduce “the amount of interaction with hard drug dealers.”
********Interesting how the opiate crisis is used as the basis both for and against the legalization of marijuana. I have been reading Methland (http://www.amazon.com/Methland-Death-Life-American- Small/dp/1608192075/) of late, and I have found it to be instructive and chilling. For people who have watched the television series Breaking Bad, and to a lesser extent Justified, there is familiar material but the people are all-too-real. More directly related to the opiate crisis is Dreamland: The True Tale of America’s Opiate Epidemic (http://www.amazon.com/Dreamland-True-Americas-Opiate- Epidemic/dp/1620402505/), by Sam Quinones. It will be my follow up to Methland.
(20 April 2016): “BMW Loses Core Development Team of Its i3 and i8 Electric Vehicle Line” (http://www.wsj.com/articles/bmw-loses-core-development-team-of-its-i3-and-i8-electric-vehicle-line- 1461086049)
------“BMW AG has lost the core development team of its i3 and i8 electric vehicle line to Future Mobility Corp., a Chinese startup backed by Tencent Holdings, as the German premium brand struggles to come up with a convincing answer to Tesla Motors Inc. . . . The defections come as BMW and other premium brand manufacturers are struggling with weak sales of their electric vehicles and a growing threat from new rivals in the nascent electric car market. . . . the defection of BMW i’s core development team suggests that BMW’s strategy of developing niche products at a time when Tesla is moving into the mass market could make it harder for MBW to attract and retain young talent in the future.”
********The article is accompanied by a 1.5-minute video. No doubt the development team was offered some significant monetary incentives to move from BMW, but I suspect, too, that talented people would like to work on a project with the potential for market transformation rather than simply serving a niche. This seems consistent the comment made at the end of the article that the launch date for the next model in the BMW i series is 2020. According to BMW CEO Harald Krüger, “That’s too long for young people who want to change the world.”
********There is so much in play in electricity and in energy at this time, with large coal, oil, and solar producers filing for bankruptcy. But solar-based power continues to expand along with new technologies. One technology is related in “Solar Panels Get Small. Real Small” (http://daily.jstor.org/solar-panels-get-small/). Such panels “can be embedded in windows, in walls, in 5
cell phones, basically anywhere you can think of—and will not really be visible.” Some of these developments are taking off from biological examples, such as polar bears.
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[The Invisible Forces Weekly: Economics with a Broader View] 262 (27 April 2016)
(21 April 2016): “’Whole Foods Effect’” When Small Food Makers Get the Call to Go Big” (http://www.nytimes.com/2016/04/21/business/smallbusiness/whole-foods-effect-when-small-food- makers-get-the-call-to-go-big.html)
------“Local food sales could hit $20 billion by 2019, up from $5 billion in 2008, the research firm packaged Facts predicts.” Behind these impressive numbers are the many small businesses that must scale up their production when a big customer like Whole Foods selects their products to sell, a challenge that has come to be known as the “Whole Foods Effect.” One firm that has managed to make the transition is Cowgirl Creamery of Marin County, California. “After five years of selling shop to shop, the entrepreneurs behind the company finally had their first big order” when Whole Foods called to buy “Cowgirl’s organic triple-cream cheese for 45 of its stores. . . . But the first batch they delivered to Whole Foods grew mold. Not the white fluffy mold that gives cheese its essence—it was the nonedible, possibly reputation-destroying black mold.” As it turns out, in the effort to expand production, the cheese aging rooms hadn’t been primed correctly. Fortunately for Cowgirl, Whole Foods was patient: “A decade later, Cowgirl employs 100 people, produces 800 pounds of cheese a day and is looking to expand by building a new creamery.”
********As the article points out, “scaling up” is a nontrivial activity and some producers simply do not want to do it. As Lindsey Ott, who makes Mama Tong soup, notes: “I just want to make enough money to live in the Bay Area and chip away at the debt I’ve accrued.”
********While we are on the subject of cheese, California, and Whole Foods, the article “A Vegan Cheese Worthy of Chardonnay” (http://www.bloomberg.com/news/articles/2016-04-21/a-vegan- cheese-worthy-of-chardonnay) caught my attention. Lyrical Foods of the Bay Area is a producer of vegan cheese—it uses almond milk and a rennet substitute that is able to grow “a thick rind, just like milk-based cheese.” Lyrical’s Kite Hill line of cheeses was “on the shelves of about 430 Whole Foods stores across the U.S. by late 2014” and will soon “be available at Fresh Market . . . and could be in as many as 1,000 stores by the end of the year.” Clearly Lyrical said “Yes!” to scaling up and succeeded.
(21 April 2016): “Hearing Aid Prices Under Pressure From Consumer Electronics” (http://www.nytimes.com/2016/04/21/business/hearing-aid-business-feels-pressure-from-consumer- electronics.html)
------“The consumer electronics industry is encroaching on the hearing aid business, offering products that are far less expensive and available without the involvement of audiologists or other professionals. that is forcing a re-examination of the entire system for providing hearing aids, which critics say is too costly and cumbersome, hindering access to devices vital for the growing legions of older Americans. . . . Whether regulations on hearing aids should be relaxed in an effort to lower costs will be the topic of a daylong public workshop being held . . . by the Food and Drug Administration.” 7
According the hearing aid manufacturers, “diagnosing the treating hearing loss are too complex for consumers to do using consumer devices, without the aid of a professional.”
********A companion article is “Obama Wants to Let You Buy Hearing Aids Over the Counter” (http://www.bloomberg.com/news/articles/2016-04-21/obama-wants-to-let-you-buy-hearing-aids-over- the-counter). Both articles points to the new competition that consumer products are providing the traditional market for hearing aids. Traditional hearing aids tend to be bundled with a variety of professional services but new consumer products are not so bundled. With the growing number of Baby Boomers in need of auditory improvement, incumbents have a lot at stake in maintaining regulatory rules. A brief report on the workshop that took place on 21 April 2016 is provided (http://blog.asha.org/2016/04/22/hearing-aid-guidance-from-the-fda/) by the American Speech- Language-Hearing Association (ASHA), which is membership group of more than 186,000 hearing- related professionals (http://www.asha.org/members/).
(22 April 2016): “As Oil Jobs Dry Up, Workers Turn to Solar Sector” (http://www.wsj.com/articles/as-oil-jobs-dry-up-workers-turn-to-solar-sector-1461280612)
------“Plunging oil and gas has generated more than 84,000 pink slips in Texas, according to the Texas Alliance of Energy Producers. But many rig hands, roustabouts, pipe fitters and even some engineers are finding a surprising alternative in the utility-scale solar farms rising from the desert near the border with New Mexico. . . . The 30,000 jobs the U.S. solar sector is projected to add this year are a fraction of the estimated 150,000 American jobs being lost in oil. And it remains to be seen whether such workers will stay in the solar sector if an oil boom returns, and beckons again with the lure of bigger paychecks that stretch into the six figures. . . . Still, the trend toward solar highlights a fundamental change in the U.S. energy mix, with some die-hard roughnecks gravitating toward what is growing: green energy.”
********What caught my attention in this article is the substitutability of oil and solar labor. This is nicely captured by Geoff Baxter, senior vice president of engineering and construction for Recurrent Energy, who commented that “Any construction worker with oil and gas experience can immediately transfer over to solar.” The question remains, though, will these workers switch back into oil should another boom comes? That next boom seems like likely, at least more remote, given the Paris climate deal that was just signed (http://www.bbc.com/news/science-environment-36108194).
(22 April 2016): “Menstruation Joins the Economic Conversation” (http://www.nytimes.com/2016/04/22/business/menstruation-joins-the-economic-conversation.html)
------“Late-night pharmacy runs. bulky pads. Periods have simply long been an uncomfortable experience. But now it has become an economic issue, too. Businesses, lawmakers and advertisers, prodded in large part by a frank online discussion of menstrual cycles and backed by calls for gender equality, have sought ways to make menstrual cycles a little less agonizing. Eight states and the District of Columbia have moved to eliminate sales tax on pads and tampons, and bills have recently 8
passed in the New York Mississippi State Senates.” An example of the impetus for legal change is given by a class action filed by five women “against the New York Taxation and Finance Department, claiming that the state should classify period pads and tampons as necessities. The suit points out that New York classifies men’s products like Viagra, Rogaine and dandruff shampoo as necessities. Failing to protect men and women equally through the tax system, the suit says, violates states tax laws, as well as state and United States constitutions.”
********The article is wide ranging, covering technological changes in period-related products, as well as legal matters. What struck me while reading the article was the many ways that our legal system differentially affects some relative to others, thereby creating relatively more opportunities for some than for others. The notion of justice in its broadest sense, it would seem, cannot be avoided. I wondered if there was something like a “legislative impact statement” that would require consideration of issues such as this, so I did a search on that term. What showed up first was the American Legislation Exchange Council (ALEC) model “Economic Impact Statement Act” (https://www.alec.org/model-policy/economic-impact-statement-act/), which is a test for environmental impact protection. Perhaps a “Legislative Impact Statement Act” could be developed, which would test social impact in a similar way?
********I thought that as long as I was at the ALEC site, I would look for other model policies. As it turns out, it was easy to do. The address is: https://www.alec.org/model-policy/. There I found 37 pages of model policies dating back 21 years, four pages of which relate to the last five months which, by my estimate, is 80 model policies. In the Year 2016, for example, 18 model policies have been posted relating to the Issue education. This cries out for further exploration. Surprisingly, there seems to be no book or dissertation devoted specifically to ALEC.
(23 April 2016): “Mushroom Suits, Biodegradable Urns and Death’s Green Frontier” (http://www.nytimes.com/2016/04/23/business/mushroom-suits-biodegradable-urns-and-deaths-green- frontier.html)
------Artist and entrepreneur Jae Rhim Lee wants to “propose a different way of thinking about death that moves us toward death acceptance,” saying that “I think death acceptance is a critical aspect of protecting our environment.” Ms. Lee is among a growing group “of entrepreneurs trying to disrupt death.” In North Carolina, Western Carolina University researchers associated with “the Urban Death Project are learning how best to turn corpses into compost.” The motivation for green burials “has shifted over the past decade,” according to Edward Bixby of the Steelmantown Cemetery green burial preserve in Woodbine, New Jersey. He says “it’s now a 50-50 split between customers who are interested strictly in the environmental benefits and those who simply don’t accept the conventions and costs associated with traditional funerals.”
********In a related article, the natural burials employed at Carolina Memorial Sanctuary are discussed (http://www.citizen-times.com/story/life/2016/04/25/carolina-memorial-sanctuary-natural- 9
no-frills-burials/83249174/). Green burials and conservation burials, it turns out, are not necessarily the same thing.
********This is probably the appropriate place to note “Putting A Price On A Life” (http://daily.jstor.org/putting-a-price-on-a-life/), a post by JSTOR Daily, which begins with the question, “If you have a life insurance policy, that means your insurance company pays your beneficiaries when you die, right?” As it turns out, that isn’t necessarily the case. “A new Florida law requires life insurance companies to actually contact the beneficiary of a policy and pay them when the policy-holder dies—something they apparently often don’t do unless a claim is filed.” That is interesting to learn in itself. But what I found intriguing was the summary of the 1978 paper by Viviana A. Zelizer, which examines how attitudes toward life insurance have changed. Evidently, people “in the early nineteenth century shied away from the product, which seemed to tie together death and commerce. But, she writes, by the end of the century, many people accepted a counterbalancing argument that not buying insurance was its own moral failing.” This suggests that “timeless values” may be more malleable than one might think. Zelizer’s article, “Human Values and the Market: The Case of Life Insurance and Death in 19th-Century America,” is linked in the post.
(25 April 2016): “Uncovering the Fiction of ‘Farm to Table’ Food” (https://www.propublica.org/podcast/item/farm-to-fable)
********This 14-minute podcast, with brief written highpoints, discusses an investigation by food critic Laura Reiley of the Tampa Bay Times. You can read the two-part story, which includes other resources, online at: http://www.tampabay.com/projects/2016/food/farm-to-fable/restaurants/. Reiley notes that in some cases, restaurants she investigated engaged in outright deception, while in others vacuous terms were used to describe the food and its origins. Caveat emptor!
(27 April 2016): “A Battle Brews Over Licensing in the Digital Age” [SR](http://www.wsj.com/articles/telemedicine-advocates-look-to-expand-nursing-licenses-range- 1461663000)
------“Hospitals and some nursing groups are lobbying state legislators across the nation to do away with requirements that nurses be licensed in each state where they work, arguing that the rules inhibit the use of new health-care methods such as telemedicine. The push to get states to join nursing licensing compacts reflects growing adoption of remote health services such as patient care and monitoring online and by the phone. Telemedicine, as it is knowns, is expected to soar in the U.S. to $1.9 billion in revenue in 2018 from $240 million in 2013, according to research firm HIS Technology.” Opposing the elimination of these actions “are up against nurses’ unions who say such compacts would jeopardize patient safety because not all states have the same licensing standards. They also say it would erode their bargaining power and make it easier for hospitals to bring in out-of- state nurses to break a strike.” 10
********As the article states, since 1999 there has been a “multistate agreement known as the nurse licensure compact . . . Twenty-three states joined by 2010, but then interest stalled, with only two states joining after that.” A newer version of the compact, with more stringent requirements, has been joined by seven states: Florida, Idaho, Oklahoma, South Dakota, Tennessee, Virginia, and Wyoming. You can learn more about the Nurse Licensure Compact, of which North Carolina is a member, at: https://www.ncsbn.org/nurse-licensure-compact.htm.
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[The Invisible Forces Weekly: Economics with a Broader View] 263 (4 May 2016)
(7 April 2016): “The sugar conspiracy” (http://www.theguardian.com/society/2016/apr/07/the-sugar- conspiracy-robert-lustig-john-yudkin)
********I came across this article by way of a link in “Sugar Has Always Been Bad” (http://daily.jstor.org/sugar-has-always-been-bad/) but I thought this was the most interesting—if much, much longer—article. It is, in fact, this week’s “Long Read” of The Guardian. It relates the story of the development of low fat orthodoxy in nutrition science and how one scientist effectively had his career destroyed because he ran afoul of that orthodoxy. The name of the scientist was John Yudkin and the book that embodied his seemingly heretical ideas about the role of sugar in heart disease was Pure, White, and Deadly (http://www.amazon.com/Pure-White-Deadly-Sugar- Killing/dp/0143125184/), published in 1972. It is a fascinating tale where the desire to save face and maintain professional status seem to have played a large role in blocking scientific progress, although economic forces play their role, too.
********As it turns out, there is also an audio version of the “Long Read.” It is 44 minutes long.
(28 April 2016): “The Real Hamilton: What’s Not to Love?” (http://www.bloomberg.com/news/articles/2016-04-28/the-real-hamilton-what-s-not-to-love)
------In this year of the hit musical Hamilton, election, and $10 bills, it is perhaps worth taking another look at Alexander Hamilton. “He was vain and opinionated. He was also usually right. No libertarian, he believed the federal government could and should play a central role in economic development. His arguments deserve fresh consideration for today’s problems—even if taking them seriously will make it harder for everyone to agree on his wonderfulness. For starters, Hamilton rejected Scottish economist Adam Smith’s then-novel doctrine of laissez-faire. [Furthermore, he] wanted the federal government to have the power to tax and spend, giving it real agency. ‘Power without revenue is a bubble,’ he wrote.”
********As the article points out, Hamilton also advocated tariffs “to protect infant industries.” Putting these ideas together, we can see why development economist Ha-Joon Chang says that Hamilton brought together “all the key elements of the economic system that have made the U.S. one of the most successful economies in human history.”
********Two books provide some additional background on Hamilton. First is the just published Concrete Economics: The Hamilton Approach to Economic Growth and Policy (http://www.amazon.com/Concrete-Economics-Hamilton-Approach-Economic/dp/1422189813/), by Stephen Cohen and Bradford DeLong. For a much broader view of the man, there the widely read Alexander Hamilton (http://www.amazon.com/Alexander-Hamilton-Ron-Chernow/dp/0143034758/), by biographer Ron Chernow. According to Michael Lind, the author of Land of Promise: An 12
Economic History of the United States, “There is no real successor to Hamilton of the political scene today,” noting that “The right . . . is nativist, and the left is antibusiness.”
(30 April 2016): “A Private Equity Alum’s Guide to Better Payday Lenders” (http://www.nytimes.com/2016/04/30/your-money/at-nerdwallet-guide-to-better-payday-lenders- james-zhang.html)
------“James Zhang has collected plenty pf prestigious stamps on his resume in the nine years since he graduated from high school and pursued a career in high finance. But he’s also an immigrant, the grandson of an illiterate rice farmer who did not have indoor plumbing until the late 1990s. So perhaps he was the most likely person to find and then shame the many state pension funds and university endowments that invest, through private equity, in the payday lending industry. . . . starting Friday, through a new guide on the website NerdWallet, where he now works, Mr. Zhang hopes to redirect as many people as possible who are seeking these loans.” Although NerdWallet makes “no money in the short term from its payday lending redirection, it is well aware that people in financial trouble now could be customers next year.”
********NerdWallet (https://www.nerdwallet.com/) “makes it simple to find the best deals on credit cards, insurance, mortgage rates and more.” Although the reporter notes, “There’s something pretty rich about a company like NerdWallet, which earns commissions from credit card issuers that charge double-digit interest rates, channeling those commissions toward keeping other customers away from the triple-digit effective interest rates that the payday lenders charge,” there seems no doubt which offer is the best for someone of limited means, i.e., everyone.
(4 May 2016): “Jane Jacobs And The American City” (http://daily.jstor.org/jane-jacobs-and-the- american-city/)
********Today would have been the 100th birthday of Jane Jacobs had she lived longer; she died in 2006. In recognition, the “Google Doodle” of the day calls attention to her life and work. A search on “Jane Jacobs” will take you to a range of materials. I was struck by the Slate article (http://www.slate.com/articles/business/metropolis/2016/05/happy_100th_birthday_jane_jacobs_it_s_t ime_to_stop_deifying_you.html), entitled “Bulldoze Jane Jacobs.” This sentence caught my attention: “Seemingly every Jacobsian paradise, from Portland, Oregon to San Francisco to the newly revitalized parts of Detroit and New Orleans, is mostly white and well-off.” Evidently, in her last book—Dark Age Ahead—she “warned that American cities would become more unequal, boring, corporate, and stricken by police brutality if we did not address underlying issues of societal decay.” JSTOR Daily provides links to a variety of articles that provide perspective on her life and work.
(4 May 2016): “Bountiful Afghan Opium Harvest Yields Profits for the Taliban” (http://www.nytimes.com/2016/05/04/world/asia/taliban-afghan-poppy-harvest-opium.html) 13
------According to an Afghan proverb, “It is spring that determines how a year turns out.” The poppy fields of Helmand Province of Afghanistan this spring indicate that “the Taliban will have a very good year.” Farmers and officials are reporting high yields and without eradication campaigns by the Afghan cancelled, and much of the land in Taliban control, “it was with peace of mind that farmers, and thousands of seasonal laborers . . . scraped the gum from the opium bulbs. Taliban fighters were just around the corner to lend a hand—and to receive their share of wages and taxes, in cash or kind. The crowded fields amounted to an insurgent recruiter’s dream.”
********The article provides a glimpse at the interdependencies between the financing of Taliban activities and opium production. So-called Taliban tax collectors go to the farmers and collect the “tax” from farmers with little apparent questioning. According to Zabihullah Mujahid, a Taliban spokesman, indicates that “opium cultivation was a regional and ‘traditional’ issue the brings people the income they need for the rest of the year.”
********Evidently the Taliban is not troubled by regional and traditional practices of opium production. In this light, the article “When economists turn to crime” (http://www.economist.com/news/united-states/21697826-how-cost-benefit-analysis-might-save- americas-criminal-justice-system-when-economists-turn). It provides a brief commentary on the recently issued report by the Council of Economic Advisers entitled “Economic Perspectives on Incarceration and the Criminal Justice System.” You can read the Executive Summary and download the report at: https://www.whitehouse.gov/the-press-office/2016/04/23/cea-report-economic- perspectives-incarceration-and-criminal-justice. The report confines itself “to questions of costs and benefits: whether locking so many people up for so long is an efficient way to reduce crime. Its conclusion is a resounding no. Incarceration does prevent some crimes from being committed . . . But hefty prison spells turn out to be a costly and clumsy way to deter offenders.” On Monday, April 25th the White House, the Brennan Center for Justice, and the American Enterprise Institute and the Brennan held a program on the topic “Criminal Justice as an Economic Issue.” You can view the almost two-hour event by a video at the link: https://www.brennancenter.org/event/criminal-justice- economic-issue. The program begins at 47:05 of the video.
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[The Invisible Forces Weekly: Economics with a Broader View] 264 (11 May 2016)
(5 May 2016): “Breeders Stew Over How to Slow Pace of Chicken Growth” [SR](http://www.wsj.com/articles/breeders-stew-over-how-to-slow-pace-of-chicken-growth- 1462372038)
------“The U.S. chicken industry has spent decades figuring out how to grow its birds fast. Now, some of its customers are looking for producers willing to slow things down. . . . [C]ompanies such as Whole Foods Market Inc. and Starbucks Corp. now are betting their customers are willing to pay more for chicken raised at a more leisurely rate. Growing demand for meat from animals raised more slowly reflects a broader shift in consumer tastes for food and farm practices regarded as more human and natural. The debate over how food should be raised has powered a flood of changes by meat companies that for decades have worked to drive down costs and scale-up production.”
********Two things really caught my attention in the article. First, “Three breeding companies— Aviagen Inc., Cobb-Vantress and Hubbard, a unit of France’s Groupe Grimaud La Corbière—provide genetics for most of the world’s chicken supply.” Second, “Whole Foods expects its transition to selling slower-growing breeds exclusively in its fresh poultry aisle will take roughly eight years.” Regardless of how eagerly Whole Foods wants to change, it takes significant time for the composition of the chicken population to change. This is a nice example of the role of the invisible handshake— social and historical forces—in human behavior. I.e., changes in consumer preferences lead—can lead—to significant changes throughout to supply chain.
(5 May 2016): “Nestlé Wants to Sell You Both Sugary Snacks and Diabetes Pills” (http://www.bloomberg.com/news/features/2016-05-05/nestl-s-sugar-empire-is-on-a-health-kick)
------“Nestlé is by far the largest food company in the world. . . . [Its] impact on the history of how we eat is almost impossible to overstate. Sweets as we know them wouldn’t exist with Henri Nestlé, the company’s founder, who in the late 19th supplied condensed milk chocolate, made by a neighbor in Vevey, Switzerland.” For more than 150 years, “sugar has been sweet. It isn’t anymore. Sugar is joining tobacco and alcohol in the club of products in which governments have taken an interest.” This is of concern to Nestlé as its confectionery sales “have fallen every year since 2012, matching declines of competitors. After assaults on sodium and saturated fats, some industry figures are wondering openly if Big Food is the next Big Tobacco, with all the destruction of value that would imply.” Among the approaches being taken by food companies to this situation, Nestlé’s is different: “It wants to invent and sell medicine. The products Nestlé wants to create would be based on ingredients derived from food and delivered as an appealing snack, not a pill, drawing on the company’s expertise in the dark arts of engineering food for looks, taste, and texture. Some would require a prescription, some would be over-the-counter, and some are already on store shelves today.”
********The intersection of food and pharmaceuticals that seems to categorize where Nestlé is headed is referred to as nutraceuticals. Regarding the strategy of Nestlé, it is said that “The company 15
would expand from the vending machine and supermarket to the pharmacy, doctor’s office, and hospital. At the same time, it would keep its core food and sweets businesses. In other words, Nestlé would sell a problem with one hand and a remedy with the other.” Regulatory agencies, it seems, figure prominently in the decisions being made by Nestlé and other food manufacturers.
********This week Fortune, too, had an interesting and related article: “Nestlé’s Half-Billion-Dollar Noodle Debacle in India” (http://fortune.com/nestle-maggi-noodle-crisis/). It is the story of how the company struggled to manage a regulatory challenge against its once-dominant brand of Maggi instant noodles in India. As a result, Maggi’s market share fell from 63% to 23% in the course of one year. It is “a cautionary tale about a towering multinational utterly losing its way in one of the world’s most sought-after markets—India—which, as it happens, has chewed up and spit out a number of mighty names in the past.” Three of those names are Coca-Cola, Walmart, and Facebook. Interestingly, though, Nestlé has done business in India for more than a century, beginning business there in 1912.
********Nestlé has had bad press in the past, especially with its sales of infant formula in Africa. Perhaps because of this, it has developed an approach that is referred to as Creating Shared Value (CSV), which lays out 39 commitments it aims to meet by 2020. In document form it is more than 300 pages long. You can learn more about CSV and download the document at: http://www.nestle.com/csv.
(5 May 2016): “’You Want A Description Of Hell?’ OxyContin’s 12-Hour Problem” (http://static.latimes.com/oxycontin-part1/#nt=oft07a-2gp1)
------“The drugmaker Purdue Pharma launched OxyContin two decades ago with a bold marketing claim: One dose relieves pain for 12 hours, more than twice as long as generic medications. . . . On the strength of that promise, OxyContin became America’s bestselling painkiller, and Purdue reaped $31 billion in revenue. But OxyContin’s stunning success masked a fundamental problem: The drug wears off hours early in many people . . . and when it doesn’t last, patients can experience excruciating symptoms of withdrawal, including an intense craving for the drug. The problem offers new insight into why so many people have become addicted to OxyContin, one of the most abused pharmaceuticals in U.S. history.”
********This article appears to be a follow up, of sorts, on an earlier four-part series in The Los Angeles Times on “Dying for Relief” (http://graphics.latimes.com/prescription-drugs-part-one/); all four articles can be reached through the link. The “Hell” article is very informative and troubling, providing a glimpse of how the approval process of the Food and Drug Administration can be used as an integral part of marketing strategy for a firm. In this case, Purdue Pharmaceutical conducted clinical trials on the basis of a 12-hour time period, rather than an 8-hour period, in order to shore up the competitive advantage of the longer period. But, when patient experience indicated that 12 hours was too long for many, Purdue was able to continue to assert that OxyContin was approved by the FDA for 12-hour doses. The truth, to be sure, but the truth because the drug was only studied for that 16
time period. Rather than administering the drug more frequently during the day, doctors prescribing the OxyContin were advised to increase the dosage. According to numerous research studies, “Those on higher doses of opioids are more likely to overdose . . . An analysis of the medical records of more than 32,000 patients on OxyContin and other painkillers in Ontario, Canada, found that one is 32 patients on high doses fatally overdosed.”
********I am currently reading, albeit slowly, Dreamland: The True Tale of America’s Opiate Epidemic (http://www.amazon.com/Dreamland-True-Americas-Opiate-Epidemic/dp/1620402521/). It connects nicely—not the best word—with the current article. Both OxyContin and black-tar heroin (Dreamland) show the power of marketing addictive drugs, legal and otherwise.
(6 May 2016): “Cartoonist Fired From Farm News for Pro-Farmer Cartoon” (http://www.nytimes.com/2016/05/06/business/media/cartoonist-fired-from-farm-news.html)
------Cartoonist Rick Friday was recently fired as the editorial cartoonist for Farm News, a position he held for 21 years. The cartoon that got him fired showed two farmers standing at a fence, talking. One farmer said, “I wish there was more profit in farming,” to which the other responded, “There is . . . In year 2015 the C.E.O.s of Monsanto, DuPont Pioneer and John Deer combined made more money than 2,129 Iowa farmers.” Friday lost his job “because a seed company had withdrawn its advertising in protest.”
********The article includes the Facebook posting made by Mr. Friday announcing that he had been fired. In it, he indicated that his situation “will shine light on how fragile our rights to free speech and free press really are in the country.” Since he published 1090 cartoons over the years, I hope we get to see some others.
(6 May 2016): “Marauding American Lobsters Find Themselves in Hot Water” (http://www.wsj.com/articles/marauding-american-lobsters-find-themselves-in-hot-water-1462457114)
------[This is the A-Hed, quirky, article.] “The male American lobster is clawing his way toward hegemony. . . . This means war—or at least a trans-Atlantic trade war. Claw size is at the center of a push by Sweden to ban imports of live Homarus americanus to all European Union countries. The effort began with the release of an 89-page report in December by the, featuring a full-color, half-page photo an American lobster and 13 instances of the words ‘invasive alien species.’”
********The Swedish report “Risk assessment of American lobster (Homarus americanus) is available at: https://www.havochvatten.se/download/18.1f4499311538d55bb494594b/1461928519265/risk- assesment-american-lobster.pdf. Senator Angus King of Maine suggests “You have to wonder if this isn’t protectionism wrapped up in a cloak of science.” Swedish officials say it isn’t, noting that “The government report cites an eerie parallel to the country’s endangered, indigenous Noble crayfish population, nearly wiped out since the 1960s by a plague that arrived with North American crayfish.” 17
(6 May 2016): “Inside the Gigafactory That Will Decide Tesla’s Fate” (http://www.bloomberg.com/features/2016-inside-tesla-gigafactory/)
********Despite the title of the article, this is more outside than inside. Nonetheless, it provides some additional information about the factory that is of general interest. Evidently it is being built in sections and is now 14 percent complete. Currently the factory is producing “Powerwall batteries for the home and the larger Powerpack for commercial users.” Car batteries will be produced there, too.
(7 May 2016): “Crony capitalism: Dealing with murky moguls” (http://www.economist.com/news/leaders/21698261-how-disentangle-business-government-dealing- murky-moguls)
------[This is one of this week’s leaders in The Economist.] “The past 20 years have been a golden age for crony capitalists—tycoons active in industries where chumminess with government is part of the game. . . . Now cronies are on the back foot. Their combined fortunes have dropped by 16% since 2016, according to our updated crony-capitalism index . . . One reason is the commodity crash. Another is a backlash from the middle class. . . . Elsewhere, pressure is coming from the top down. . . . Crony capitalism—or ‘rent-seeking’, as economists call it—shades from string-pulling to bribery. Much of it is legal, but all of it is unfair. It undermines trust in the state, misallocates resources and stops countries and true entrepreneurs from getting rich. So the dip in crony activity is welcome. To stop it roaring back, governments need to seize the moment.”
********The leader goes on to describe four “quickest fixes” for dealing with cronyism, which are clearly laid out. Two articles are connected to the leader. First, the lengthier discussion of the crony- capitalism index: http://www.economist.com/news/international/21698239-across-world-politically- connected-tycoons-are-feeling-squeeze-party-winds. It describes the idea behind the crony index, noting that behind it lies “the idea that some industries are prone to ‘rent seeking’. This is the term economists use when the owners of an input of production—land, labour, machines, capital—extract more profit than they would get in a competitive market. Cartels, monopolies and lobbying are common ways to extract rents. Industries that are vulnerable often involve a lot of interaction with the state, or are licensed by it.” Second, there is the list of rent-seeking sectors included in the index: http://www.economist.com/blogs/graphicdetail/2016/05/daily-chart-2. Of the 22 countries examined, Russia was the most crony ridden, while Germany was the least; the U.S. was at 16, two places closer to Germany than Britain. You can learn more about the Index, with references, at: https://en.wikipedia.org/wiki/Crony-capitalism_index.
(9 May 2016): “The Rise Of Teachers’ Unions” (http://daily.jstor.org/the-rise-of-teachers-unions/)
------Recent strikes in Detroit and Chicago show that “teachers and other public-sector employees are often the most visible representatives of the modern labor movement. But public employees are relative newcomers to U.S. unions. . . . The sudden advent of public-sector unionism was partly a product of legal changes. In 1962, President John F. Kennedy issued an executive order allowing 18
federal workers to unionize, and some states and cities followed suit. But, in many cases, it was only militant—and illegal—action by teachers and other public-sector workers that forced politicians to change laws.”
********As the article indicates, the rise “of public-sector unions was closely tied to other social movements,” including the Civil Rights and feminist movements. At the time of his death, Martin Luther King, Jr. was in Memphis “to support a strike by public-sector sanitation workers” and “Unionization was an obvious rote toward the goal of equal pay for women’s work, and public-sector unions were—and still are—more likely to be led by women than their private-sector counterparts.”
(9 May 2016): “Starting a career? Don’t live here” (http://www.newsobserver.com/news/business/article76495467.html)
------“Is it easier or harder to start a career in your city compared to the rest of the country? . . . A study by WalletHub, a personal finance research site, looked at 150 cities in the United States using 17 measures, including number of entry-level jobs, median starting salary and housing affordability. . . . Of the top 10 worst cities to start a career in, California had four of them, while Texas had four of the top 10 best cities.”
********Here is the link to the results for the WalletHub study: https://wallethub.com/edu/best-worst- cities-to-start-a-career/3626/. Asheville, North Carolina was not one of the cities studied. However, state cities that were studied, in order of best to start, are: Raleigh (6), Charlotte (22), Durham (42), Greensboro (83), Winston-Salem (87), and Fayetteville (99). In the specialized category Highest Starting Salaries (adjusted for cost of living), Durham came in at (2), behind Houston, Texas (1). This is the second time in, I believe, three weeks that WalletHub has been mentioned in the news, the previous time connected to payday loan information. This might be something to keep an eye on.
(11 May 2016): “Flower Fight: the Scandalous $45 Million Little Petunia Case” (http://www.bloomberg.com/news/articles/2016-05-11/flower-fight-the-scandalous-45-million-little- petunia-case)
------“Forget for a minute that the flower industry sells beauty and fragrance. Underneath its elegance is a business as cutthroat as Game of Thrones with mulch. Take the case of the Candy Bouquet, a pretty, magenta-and-yellow flower that resembles a petunia. It was developed by a German grower, Westhoff Vertriebsgesellschaft MBH, that says it was on the verge of selling the variety to Home Depot Inc. when a rival swooped in, copied the plant and spread lies about Westhoff in order to win the business of the world’s largest home-improvement chain.” Legal disputes over the intellectual property embedded in plants is likely to grow, as there were “1,049 plant patents issued in 2015.” Still the number of suits has been small: “There were nine lawsuits involving plant patents since 2009. . . . Most companies . . . resolve their differences without the courts,” according to Westhoff lawyer Russ Orkin. 19
********As the article notes, “Flowers and other plants that appear in nature can’t be patented. Instead, companies develop new varieties through grafting or budding and obtain patents on them under the 1930 Plant Patent Act for plants that produce asexually, without seeds.” You can learn more about the Act at: https://en.wikipedia.org/wiki/Plant_Patent_Act_of_1930.
********While exploring this article, the expression “red herring” occurred to me. During an election year, perhaps, it is well to keep in mind that “A red herring is something that misleads or distracts from a relevant or important issue.” The definition is taken from its Wikipedia entry, which is really quite interesting. Here is the link: https://en.wikipedia.org/wiki/Red_herring.
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[The Invisible Forces Weekly: Economics with a Broader View] 265 (18 May 2016)
(4 May 2016): “Are We Entering A New Golden Age Of Guano?” (http://daily.jstor.org/golden-age- of-guano/)
------“A history of civilization could be written in fertilizers. Since the advent of agriculture more than 10,000 years ago, the essential problem has been the same: How do we replace the nutrients extracted from soils by crops? . . . Although the list of traditional fertilizers is long and bizarre, none has so strange a history as guano, which was once the agricultural equivalent of gold.”
********The article points out that “Manures like guano make great fertilizer because they both add nutrients and help build soils. Synthetic fertilizers don’t do the latter.” In addition, synthetics are responsible for a host of byproducts with undesirable consequences. However, guano production will no likely play a large factor in displacing synthetic fertilizers, as “Guano production today is about 12,000 tons annually, at the peak of guano importation to the U.S., in 1854, 175,849 tons arrived.”
(12 May 2016): “Pew report details decline of income, middle class in NC metro areas” (http://www.newsobserver.com/news/local/article77287702.html)
------“Median household income fell 8 percent nationwide between 1999 and 2014 when adjusted for inflation, but the decline was especially severe in some of North Carolina’s small metropolitan areas, according to a new study from the Pew Research Center. Winston-Salem, Burlington, Rocky Mount and Goldsboro all experienced declines in median income of 20 percent or more during that period and rank among the 10 worst-performing metro areas included in the study.”
********Pew’s overview of its report can be found at: http://www.pewsocialtrends.org/2016/05/11/americas-shrinking-middle-class-a-close-look-at-changes- within-metropolitan-areas/. At that link you can access the Complete Report, Detailed Tables, and other materials. On page 51 of the Complete Report (http://www.pewsocialtrends.org/files/2016/05/Middle-Class-Metro-Areas-FINAL.pdf), the reasoning behind “The choice of time periods” is explained. It notes that although is generally desirable “to avoid comparisons across different points of the business cycle.” In this study, “the income comparisons may not involve exactly comparable points in the business cycle.” Worth remembering.
(13 May 2016): “Federal Microbiome Project Aims to Solve Tiny Riddles of Science” (http://www.nytimes.com/2016/05/13/us/politics/federal-microbiome-project-aims-to-solve-tiny- riddles-of-science.html)
------“The Obama administration on Friday will announce the latest in its scientific ‘moonshots,’ this one in the red-hot field of microbiomes—the trillions of micro-organisms in places like soil and the human gut. The new National Microbiome Initiative is intended to create scientific tools, discoveries and training techniques that could advance efforts to cure asthma and depression, clean up oil spills 21
and even increase crop yields.” According to the director of the White House Office of Science and Technology Policy, John P. Holdren, “This initiative is about connecting a lot of the threads and looking for common insights across different domains.”
********You can learn more about the Initiative at: https://www.whitehouse.gov/the-press- office/2016/05/12/fact-sheet-announcing-national-microbiome-initiative. A complete list of participating agencies and institutions, with brief descriptions, can be found at: https://www.whitehouse.gov/sites/whitehouse.gov/files/documents/OSTP%20National%20Microbiom e%20Initiative%20Fact%20Sheet.pdf.
(13 May 2016): “Antitrust in the Age of Amazon” (http://www.nytimes.com/2016/05/13/business/office-depot-staples-merger-antitrust-amazon.html)
------“In the age of Amazon, evaluating antitrust concerns is sometimes twisting government officials into knots. That was made clear this week, when the Federal Trade Commission blocked the merger of Office Depot and Staples, in part by drawing elaborate distinctions between who buys pens and printer ink cartridges, and how. The products are widely available online, of course, including from Amazon . . . But big companies, the F.T.C. argued, like to shop in bulk, and often don’t buy their ink from the same places as people shopping for themselves. For bulk purchases of Post-it Notes and pens, Office Depot and Staples are the primary options.” The arguments of the Commission underscore “just how complicated it has become to judge Amazon’s place in the retail industry. To put it simply: The agency does not think that the company benefits all customers equally.”
********Presumably, potential competition is a factor this is (or ought to be) considered in assessing the impact of a merger. In the age of the Internet one would think that the possibility for potential competition for incumbents would be meaningfully expanded. A new competitor might be developed—I am grossly overstating the case—simply by writing a few lines of code.
(13 May 2016): “The new book ‘The Other Slavery’ will make your rethink American history” (http://www.latimes.com/books/jacketcopy/la-ca-jc-native-american-slavery-20160505-snap- story.html)
------“It is not often that a single work of history can change the course of an entire field and upset the received notions and received knowledge of the generations but that is exactly what” Andrés Reséndez does in The Other Slavery: The Uncovered Story of Indian Enslavement in America. Reséndez “boldly argues that slavery, not necessarily disease and misfortune, was the one part of the colonial matrix that decimated the indigenous population of North America and the institution of this ‘other slavery’ was the model for all others.”
********So, it would seem, the African slave trade seems to have been influenced by the slavery of indigenous populations “that was in many ways more fundamental.” A book like this (http://www.amazon.com/Other-Slavery-Uncovered-Enslavement-America/dp/0547640986/) would 22
probably provide an enriching context for reading Honest Patriots: Loving a Country Enough to Remember Its Misdeeds (http://www.amazon.com/Honest-Patriots-Country-Remember- Misdeeds/dp/0195378830). The economics of slavery has long been a controversial topic in the economics literature, with the 1974 book Time on the Cross: The Economics of American Slavery (http://www.amazon.com/Time-Cross-Economics-American-Slavery/dp/0393312186/), being one important element of it. Perhaps The Other Slavery will provide a new perspective for such work.
(15 May 2016): “China killed thousands of Maine jobs. Now it’s eating up the state’s lobsters.” (https://www.washingtonpost.com/news/wonk/wp/2016/05/15/this-tiny-american-town-is-staking-its- future-on-chinese-foodies/)
------Little Cranberry Island, off the coast of Maine, with 70 inhabitants and “China, a nation of 1.4 billion people, increasingly find themselves connected by the shifting currents of the world economy. The rise of China’s middle class has coincided with a boom in Maine’s lobster population, resulting in a voracious new market for the crustacean’s succulent, sweet meat. Exports of lobsters to China, nonexistent a decade ago, totaled $20 million last year. The bright red color of a lobster’s cooked shell is considered auspicious, making it a staple during Chinese festivals and at weddings. The lobster’s tale is a testament to the complexities of the global marketplace—and a reminder that the line between economic winners and losers is not always clear.” The increased catch of lobster, possibly due to the decline of the Cod fishery, has necessitated the development of new customers in order to prevent large price declines and China was the natural market to cultivate.
********The article points to the interesting structure of Maine’s lobster fishermen. “Each of Maine’s 5,785 lobstermen is an independent business: A license allows its holder to own one boat, and he must do the fishing himself. . . . State law prohibits dealers from owning boats and lobstermen from becoming dealers, ensuring this $500 million industry remains decentralized.” The desire to cultivate the Chinese market is especially easy to understand when we recall recent European concerns about the invasive character of American lobsters in European waters: http://www.wsj.com/articles/marauding-american-lobsters-find-themselves-in-hot-water-1462457114.
(16 May 2016): “Consultants” Recommending Consultations For 100+ Years” (http://daily.jstor.org/consultants-recommending-consultations-100-years/)
------“In a 2001 paper, Christopher D. McKenna traces the history of the management consulting industry, offering clues into what real value the firms provide. . . . [T]he first consulting groups were partnerships of accountants, lawyers, and engineers formed in the 1920s. . . . Companies hired them to look at problems they were having in specific departments. A defining moment for the industry came in 1933, with the passage of the Glass-Steagall Act, separating commercial and investment banking. Commercial banks were no longer allowed to do consulting and reorganization works for clients.” As a result, “new firms rose up to take their place. Instead of narrow tweaks to specific processes, they began advising large corporations about broad, fundaments aspects of their business.” 23
********The article by McKenna, which is linked at the bottom of the post, was later followed up by a book: The World’s Newest Profession: Management Consulting in the Twentieth Century (http://www.amazon.com/Worlds-Newest-Profession-Management-Consulting/dp/0521757592/).
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[The Invisible Forces Weekly: Economics with a Broader View] 266 (25 May 2016)
(19 May 2016): “How Big Pharma Uses Charity Programs to Cover for Drug Price Hikes” (http://www.bloomberg.com/news/articles/2016-05-19/the-real-reason-big-pharma-wants-to-help-pay- for-your-prescription)
------“In August 2015, Turing Pharmaceuticals and its then-chief executive, Martin Shkreli, purchased a drug called Daraprim and immediately raised its price more than 5,000 percent. Within days, Turing contacted Patient Services Inc., or PSI, a charity that helps people meet the insurance copayments on costly drugs. Turing wanted PSI to create a fund for patients with toxoplasmosis, a parasitic infection that is most often treated with Daraprim. Having just made Daraprim much more costly, Turing was now offering to make it more affordable. But this is not a feel-good story. It’s a story about why expensive drugs keep getting more expensive, and how U.S. taxpayers support a billion-dollar system in which charitable giving is, in effect, a very profitable form of investing for drug companies—one that may also be tax-deductible.”
********As the article notes, charities like PSI provide “cover” for the enormous price increases on some drugs. One might say they “enable” such price increases. This topic is touchy but worth the time to become a little more informed about it. The article includes access to an 11-minute interview with one of the authors of the story, in which some of the issues are laid out more fully. In economic terms, the copays financed by pharmaceutical firms via contributions to charities ensure that the quantity of a drug demanded will decline much less than would be the case in their absence. In other words, the copays make the demand more inelastic than would be the case in their absence, reducing revenue loss from declines in units sold as prices increase. It is not surprising, then, that some charities have drawn attention to the return on investment pharmaceutical firms can make by making contributions to them.
(21 May 2016): “Smoked” Cuba’s Cigar Industry Isn’t Ready for Its American Moment” (http://www.wsj.com/articles/smoked-cubas-cigar-industry-isnt-ready-for-its-american-moment- 1463767535)
------“For more than 50 years, Cuba hasn’t been able to sell its cigars its giant neighbor to the north, the world’s largest cigar market. Now, with the U.S. moving to restore trade with Cuba, excitement is building that a great opportunity is at hand. If the trade embargo is lifted anytime soon, however, Cuba is unlikely to be ready.” For one, the “amount of tobacco under cultivation in Cuba declined 65% between 2009 and 2014, to 21,733 acres, and annual tobacco production declined 21% to about 20,000 tons.” The land that has gone out of tobacco has either been left fallow or moved to more economically productive crops, like cucumbers. Also contributing to the challenges of expanding production is a lack of resources, such as fuel and fertilizers, and a paucity of people who can hand roll cigars. 25
********The article points to the many challenges faced by cigar producers as they hope to scale-up production. Cuba’s response to the (likely) drop of the trade embargo will provide a useful test of how a relatively socialistic regime responds to an increase in market demand. In the meantime, what is the explanation for the decline in cigar exports since 2006 and the decline in land cultivation in Cuba since 2009? A decrease in global cigar demand, presumably. Some of that demand, no doubt, was driven by the U.S. even though imports to the U.S. were illegal.
(21 May 2016): “How the West (and the Rest) Got Rich” (http://www.wsj.com/articles/why-the-west- and-the-rest-got-rich-1463754427)
------“Nothing like the Great Enrichment of the past two centuries had ever happened before. Doublings of income . . . had happened often, during the glory of Greece and the grandeur of Rome, in Song china and Mughal India. But people soon fell back.” What caused the Great Enrichment? “The usual explanations follow ideology. On the left, from Marx onward, the key is said to be exploitation. . . . On the right, from the blessed Adam Smith onward, the trick was thought to be savings. . . . A recent extension of Smith’s claim . . . is that the real elixir in institutions. . . . But one of the explanations gets it quite right. What enriched the modern world wasn’t capital stole from workers or capital virtuously saved, nor was it institutions for routinely accumulating it. . . . capital became productive because of ideas for betterment . . . As Matt Ridley put it in his book The Rational Optimist (2010), what happened over the past two centuries is that ‘ideas started having sex.’ . . . The coupling of ideas in the heads of the common people yielded an explosion of betterments.” Why did ideas start having sex? “The answer, in a word, is ‘liberty.’” But ‘equality’ and ‘liberalism’, in their special meanings, also played a role.
********This article was written by Deirdre N. McCloskey, distinguished professor emerita of economics, history, English and communication at the University of Illinois at Chicago, who is the author of the recently-released Bourgeois Equality: How Ideas, Not Capital or Institutions, Enriched the World (http://www.amazon.com/Bourgeois-Equality-Capital-Institutions- Enriched/dp/022633399X/). This is the third and final volume of “McCloskey’s ambitious trilogy arguing that bourgeois values, rather than material circumstances, catalyzed the past server centuries’ explosion in wealth” (http://www.amazon.com/Bourgeois-Equality-Capital-Institutions- Enriched/dp/022633399X/).
(24 May 2016): “The Invention Of Retirement” (http://daily.jstor.org/the-invention-of-retirement/)
------Retirement “as a mass phenomenon didn’t start as a way for older people to enjoy themselves. In a 1978 paper for the Journal of Social History, Carole Haber explains how social and industrial events in the late nineteenth century led to the creation of old-age pensions and mandatory retirements.” During that time, “employers like railroads, factories, and mining companies were under rising pressure from labor unions. To pacify workers, they began adopting benefit programs, including old age pensions. . . . Haber notes that employers set mandatory retirement ages of 65 or 70.” 26
Economist Francis Amasa Walker “advocated for laws keeping workers from continuing on the job ‘beyond the term which physiological science accepts as consistent with soundness and vigor.’ As the twentieth century dawned, efficiency experts insisted that older works dragged down the pace of operations. Or as Haber puts it, ‘The industrial pace, all agreed, used up the laborer, leaving him at sixty-five little more than a shell of his youthful self.’”
********A link to Haber’s article is provided at the end of the article. It is interesting to note that F.A. Walker passed away when he was 56. You can learn more about Walker, who was the president of MIT for 15 years, at: https://en.wikipedia.org/wiki/Francis_Amasa_Walker.
(25 May 2016): “The Real Reason Fine Art Costs So Much” (http://daily.jstor.org/the-real-reason- why-fine-art-costs-so-much/)
------“Christie’s spring art auction this year featured a sculpture of Hitler—made with materials including human hair—selling for $17.2 million, and a lithograph of a Mona Lisa with a mustache and goatee bringing in $1.2 million. To outsiders, art auctions can seem like a parody of bizarre spending by wealthy people, writing in Winterthur Portfolio in 2008, John Ott explained how they got that way, starting in the late nineteenth century. Ott writes that in order to understand the origins of art auctions, we need to look at the art collectors of the Gilded Age.”
********Evidently awareness of class identity of the time played a role in the development of art auctions that spoke directory to a new elite identity. A link to Ott’s article is provided at the end of the article.
(25 May 2016): “You Worked Monday. Why Not Get Paid Monday?” (http://www.bloomberg.com/news/articles/2016-05-25/you-worked-monday-why-not-get-paid- monday)
------“Cash crunches . . . lead many people to pile up credit-card debt, bounce checks, or turn to payday lenders, which charge high interest rates and fees for making loans against your paycheck. The result can be additional fees for late payments and overdrafts in a financial spiral.” But there is another option. Employers with “a service called PayActiv . . . lets employees withdraw a portion of the money they earn, as they earn it, without waiting for a paycheck. The transaction fee is $5.” Recently, PayActiv won “a Best of Show award at FinovateSpring 2016 for its use of technology to ease the ‘cash flow struggles of working families.’” In a “sign of the times, ride services such as Lyft and Uber have rolled out Instant Pay and Express Pay services for their drivers.” Notes Ryan Falvey, who works for the Center for Financial Services Innovation, “So many of our financial services today are based on a stability of lifestyle and income that very few people have now.”
********I thought the point made by Ryan Falvey was both interesting and important. The article also contains a valuable comparison of the cost of various short-term loans, ranging from borrowing 27
from an IRA to payday loans. Short-term loan counselling is probably something that needs to be made more widely available.
28
[The Invisible Forces Weekly: Economics with a Broader View] 267 (1 June 2016)
(28 May 2016): “Will microbes save agriculture?” (http://www.latimes.com/business/la-fi-soil- microbes-20160527-snap-story.html)
------David Perry, of Cambridge, Massachusetts-based Indigo Agriculture, “believes the next agricultural revolution will come from . . . the millions of unseen microbes in soil that play a crucial but complicated role in the well-being of plants. Perry believes that he can repackage beneficial bacteria and fungi as something akin to human probiotics and deliver them to plants to alter their microbiome in ways that will boost growth, increased resistance to drought, disease and pests, and reduce farmers’ reliance on fertilizers and pesticides.”
********As the article goes on to note, microbes “were left behind amid the rise of chemical fertilizers and pesticides. Those ushered in the biggest sustained expansion in food supply in human history, but left a legacy of environmental damage, including nitrates in water and toxic traces in food.” So, the chemical revolution in agriculture led to many unintended consequences with which we are living today. Surely the same will be true of the microbial revolution in agriculture the cusp of which we are on. We can only anticipate all of the consequences in model worlds of our own construction. You can learn more about Indigo Agriculture at: https://www.indigoag.com/.
********The article employs the word ‘hologenome’ to describe the genetic evolutionary co- dependence of plants and microbes, about which you can learn more at: https://en.wikipedia.org/wiki/Hologenome_theory_of_evolution. A detailed examination of the concept can be read at: http://journals.plos.org/plosbiology/article/asset?id=10.1371%2Fjournal.pbio.1002311.PDF. As mentioned previously, my interest and awareness of the microbiome, both within us and without us, is due to the engaging The Hidden Half of Nature: The Microbial Roots of Life and Health (http://www.amazon.com/Hidden-Half-Nature-Microbial-Health/dp/0393244407/), by David R. Montgomery and Anne Biklé.
********An alternative approach, perhaps, to a microbial approach to agriculture would be to use nanotechnology, i.e., really small chemicals. This is discussed in “How nanotechnology can help us grow more food using less energy and water” (https://theconversation.com/how-nanotechnology-can- help-us-grow-more-food-using-less-energy-and-water-59034). I stumbled upon this article via one of the JSTOR Daily articles (http://daily.jstor.org/suggested-readings-evidence-for-police-work-nanotech- for-agriculture-categories-for-thinking/). It turns out that the location of the article, The Conversation, seems to be a useful source of information on a variety of topics as it provides “Academic rigor, journalistic flair.” You can learn more at: https://theconversation.com/us.
(28 May 2016): “Opioids: The problem of pain” (http://www.economist.com/news/international/21699363-americans-are-increasingly-addicted- opioids-meanwhile-people-poor-countries-die) 29
********I just finished reading Dreamland: The True Tale of America’s Opiate Epidemic (http://www.amazon.com/Dreamland-True-Americas-Opiate-Epidemic/dp/1620402521/), by Sam Quinones. The book has “stuck” to me like few I have read. As a result, I have become sensitized to the frequent references to opioids in the news, whether it be local, regional, national, or international. As I began to read this article in The Economist, I saw some familiar things but the familiar soon ended. The dramatic point made was that although in some countries, like the U.S., opioids are used in great excess, however there are many countries in which they are not used enough, with the consequence that there is much unnecessary pain being endured. I remember hearing from a colleague long ago that “Bad cases make bad law” and that is surely what is at work, here. Legal and regulatory approaches developed in more-developed countries in which abuse has been rampant seem to have been adopted, and sometimes made more stringent, in lesser-developed countries.
(28 May 2016): “Oil-price reporting: Striking it rich” (http://www.economist.com/news/business/21699479-niche-business-straddling-journalism-and-oil- proving-surprisingly-lucrative-striking-it)
------“Two lines of business have stood out of late for their inability to make money: journalism and oil. So when it emerged on May 23rd that Argus Media, a British firm that reports global commodities prices, is to be sold to an American investment firm for $1.4 billion, it aroused a variety of emotions. One was surprise. ‘Data about oil markets now seem to be worth more than oil itself,’ . . . Another . . . was ‘jealousy’. The sale has turned some of Argus’s 750 scribblers, a quarter of whom are said to own shares or options, into millionaires.” Both Argus, and its competitor Platts, report “prices of the most widely used oil benchmarks, such as Dated Brent and West Texas Intermediate (WTI), against which billions of dollars-worth of oil are price each day. The benchmarks are used by oil companies, oil- producing countries, derivatives traders and others to decide at what level they should price hundreds of different grades of oil.”
********The article clearly points to the importance of oil price information and how it is used in the pricing decisions of those selling oil-related products. Clearly firms are willing to pay substantial sums to obtain pricing information, information that is generally not easy to get and not without its own price.
(31 May 2016): “Nuns With Guns: The Strange Day-to-Day Struggles Between Bankers and Regulators” [SR](http://www.wsj.com/articles/nuns-with-guns-the-strange-day-to-day-struggles- between-bankers-and-regulators-1464627601)
------“The 2010 Dodd-Frank law . . . is one of the most complex pieces of legislation ever. At more than 22,000 pages of rules, it . . . covers matters from how much capital banks must set aside to how they can advertise.” The “new regulations, and growing armies of rule-interpreters and enforcers . . . are bringing striking changes to banks’ internal cultures.” Tens of thousands of new staff are being hired “to keep their employers right with the new regime. . . . The regulatory tightening has helped 30
change the profile of a big bank in the postcrisis era. It now looks more like a utility, subject to complex rules about how it can do business and answering to government watchers whose careers depend on enforcing those rules with vigor.” As a result of these developments, “formal and informal rifts are defining features of life in a bank.” Relationships between bank employees and regulators have become more formal, and within banks, the relationships between compliance employees and bank staff have become more awkward. Compliance employees “serve as middlemen between the regulatory agencies and bank staff,” making them “feel like hallway monitors. A compliance officer at a large bank said that when he approaches employees’ offices or cubicles to discuss issues, they usually drop what they are doing, close computer screens and hang up phones.”
********The article provides a remarkable description of some of the consequences of Dodd-Frank. Do those who write rules consider such things as organizational culture, in particular the relational consequences of rule changes?
31
[The Invisible Forces Weekly: Economics with a Broader View] 268 (8 June 2016)
(1 June 2016): “America’s Workforce Runs On Narcotic Stimulants” (http://daily.jstor.org/americas- workforce-narcotic-stimulants/)
------“Over the past five years, reports of a growing amphetamine epidemic in the United States have surfaced in unlikely places: From gym rats to Hollywood actresses to fearful college kids and stressed writers, there’s been no lack of exposes and personal interviews on the country’s prescription amphetamine and methamphetamine users. Yet of all the reports, some of the most disturbing have been those chronicling the use of ADHD drugs to keep up in the workplace. Abuse by young professionals is distressingly common—Wall Street traders, software engineers, dentists, nurses, and lawyers, all cracked out of their minds trying to keep up with the competition.”
********Or, one might add, to get an edge on the competition. This JSTOR Daily article takes a look at both the present and past of the use of narcotic stimulants and some other psychoactive drugs, and provides many relevant references. It was interesting to read that W.H. Auden and Ayn Rand “couldn’t work without their daily doses of amphetamines.” Evidently, completion of The Fountainhead was facilitated by Rand’s use of Benzedrine (http://www.slate.com/articles/arts/culturebox/features/2013/daily_rituals/auden_sartre_graham_green e_ayn_rand_they_loved_amphetamines.html).
********I have been wondering about my interest in reading about drugs and I have come to the conclusion that they provide a ready context for exploring the invisible forces: the invisible hand (economic forces), the invisible foot (legal and political forces), and the invisible handshake (social and historical forces). For example, the invisible foot defines the domains of legal and “black” markets, where the invisible hand is at work, although in different ways. I’ll share some additional thoughts about this system of forces at a later time. My current reading—Narco-Nomics: How to Run a Drug Cartel (http://www.amazon.com/Narconomics-How-Run-Drug-Cartel/dp/1610395832/), by Tom Wainwright—has contributed to my thoughts about this.
(3 June 2016): “Environmental Crimes May Cost World Economy $258 Billion: Study” (http://www.bloomberg.com/news/articles/2016-06-03/environmental-crimes-may-cost-world- economy-258-billion-study)
------On the eve of World Environment Day, the United Nations Environment Program and Interpol released a report indicating that “Environmental crimes are rising due to weak laws and enforcement, costing the global economy as much as a record $258 billion, about a quarter more than previously estimated.” The report also said that “proceeds from crimes ranging from illegal logging to the trafficking of hazardous waste and illicit gold mining are funding rebel groups and criminal syndicates.” 32
********You can learn more about the report, including access to a downloadable full report, at: http://www.unep.org/NewsCentre/default.aspx?DocumentID=27076&ArticleID=36202.
(4 June 2016): “My Transgender Transition: When Donald Became Deirdre” (http://www.wsj.com/articles/transgender-when-donald-became-deirdre-1464967229)
********Deirdre McCloskey is “distinguished emerita of economics, history, English and communication at the University of Illinois at Chicago.” In a long and prolific career, she has written widely and well, most recently Bourgeois Equality: How Ideas, Not Capital or Institutions, Enriched the World (http://www.amazon.com/Bourgeois-Equality-Capital-Institutions- Enriched/dp/022633399X/). She relates her gender transition in Crossing: A Memoir (http://www.amazon.com/Crossing-Memoir-Deirdre-N-McCloskey/dp/0226556697/), which was published in 1999. McCloskey was educated, both undergraduate and Ph.D., at Harvard and earned tenure at the University of Chicago in 1975. Her Curriculum Vitae is online at: http://www.deirdremccloskey.com/main/vita.php. Deirdre McCloskey brings a human face and a sense of humor to contemporary issues about who should use what bathroom.
(4 June 2016): “The Rise and Fall of Iridium” [SR](http://www.wsj.com/articles/the-fall-and-rise-of- iridium-1464980784)
------[This is a review of Eccentric Orbits: The Iridium Story, by John Bloom.] “Unless you happen to be a sailor, scientist or survivalist, there’s probably only a middling chance that the name Iridium rings a bell. But a decade and a half ago it was front-page news—an ill-fated satellite-phone company whose failure represented one of the largest bankruptcies in American history. Launched in 1998 . . . the Iridium system was ballyhooed as a technological marvel, which indeed it was: Dozens of interlinked satellites, launched into a low-earth elliptical orbit, would offer coverage anywhere on the globe to anyone who owned a satellite-compatible handset. At a time when cell phone usage stood at only 300 million (the number is 7 billion today), Iridium promised to revolutionize mobile communications forever.” That didn’t happen, in part because of a flawed marketing plan. “We tend to forget that one of the big innovations of the early cellular-phone era was not the technology itself but the pricing plans . . . These make expensive phones affordable to almost anyone and helped the networks expands quickly.” In contrast, the Iridium handsets were “extremely costly, at around $3,000, but the pricing plans often left users with bills well in excess of $3 per minute. Even worse, . . . Iridium couldn’t really reduce its prices, because [parent-company] Motorola had structured the business so as to ensure that large mandatory payments . . . would go directly from Iridium to Motorola. . . . And it meant that Iridium was in financial straits before it even connected its first caller.”
********You can learn more about the book at: https://www.amazon.com/Eccentric-Orbits-Iridium- John-Bloom/dp/0802121683/. The reviewer of Eccentric Orbits is Jon Gertner, the author of the well- regarded The Idea Factory: Bell Labs and the Great Age of American Innovation 33
(https://www.amazon.com/Idea-Factory-Great-American-Innovation/dp/0143122797/). Eventually, a new CEO for Iridium—Dan Colussy—was able to create a new business model and secure investors to create a viable business. Supporters of the new direction were “a group of government technocrats and Pentagon” who became convinced that the system was “too valuable to destroy.” In essence, “The Iridium market was any place in the world where your phone was the only phone.” Over the ensuing decades “Mr. Colussy begins to demonstrate . . . that the company didn’t get the technology wrong. It got the market wrong.” The review is a reminder of how mechanically, perhaps even magically, pricing decisions tend to dealt with in economic textbooks. An exception to this is Microeconomics, by Goolsbee, Levitt, and Syverson, all of the University of Chicago, which is now available in a second edition. You can learn more about the book at: https://www.amazon.com/Microeconomics- Austan-Goolsbee/dp/1464187029/.
********While we are on the subject of prices, it is perhaps worth noting that the same market structures that enable firms to exercise their creativity in constructing prices also provide an opportunity for governments to exercise creativity in setting prices. I have two examples in mind. One is the recent advocacy of a $500 per semester tuition at certain universities in the University of North Carolina system (http://www.newsobserver.com/news/local/education/article81232307.html) and another is minimum-unit pricing on alcohol in Scotland [SR](http://www.wsj.com/articles/alcohol- makers-await-scottish-vote-1465119010). Evidently, wherever there is an opportunity to exercise market power by firms, there is also an opportunity to exercise political power by governments. The invisible foot, then, has a role to play in enabling and controlling the exercise of power by firms and governments.
(4 June 2016): “A Guaranteed Income for Every American” (http://www.wsj.com/articles/a- guaranteed-income-for-every-american-1464969586)
********This seemed to be the week for important news outlets to discuss the idea of Universal Basic Income (UBI). This article, “The Saturday Essay,” is by Charles Murray, “the W.H. Brady Scholar at the American Enterprise Institute.” He first advanced the idea in 2006 in the book In Our Hands: A Plan to Replace the Welfare State. It has now been revised and updated for 2016. You can learn more about it at: https://www.amazon.com/Our-Hands-Replace-Welfare-State/dp/1442260718/. Another reason for the UBI to be “in the news” is the vote that took place last weekend in Switzerland regarding the possible adoption of a UBI, which was soundly defeated (http://www.pbs.org/newshour/making-sense/why-universal-basic-income-isnt-going-away-any-time- soon/). The Economist discussed the UBI this week in one of its leaders (http://www.economist.com/news/leaders/21699907-proponents-basic-income-underestimate-how- disruptive-it-would-be-basically-flawed) and at length in a Briefing (http://www.economist.com/news/briefing/21699910-arguments-state-stipend-payable-all-citizens-are- being-heard-more-widely-sighing). 34
********The UBI idea has been around for a long time, with Milton Friedman’s negative income tax (https://en.wikipedia.org/wiki/Negative_income_tax) being a direct forerunner, as Charles Murray notes. An essential element of Murray’s advocacy of a UBI is the elimination of virtually all existing welfare programs, an approach that makes the budgetary cost less than it would otherwise be. In my search for relevant materials, I ran across the website of the Basic Income Earth Network (http://www.basicincome.org/), an organization that “was founded in 1986 to serve as a link between individuals and groups committed to or interested in basic and income.” It is an intriguing site and shows that UBI is being discussed in many venues across the world, even in the U.S. Murray argues that the changing nature of work brought on by the ongoing digital revolution is making consideration of such plans necessary.
(7 June 2016): “Putin Is Growing Organic Power One T-34 Tank-Tomato at a Time” (http://www.bloomberg.com/news/features/2016-06-07/putin-is-growing-organic-power-one-t-34- tank-tomato-at-a-time)
------“Stung by oil’s collapse, the ruble’s plunge, financial sanctions over Ukraine and the longest recession of his 16-year rule, [Vladimir] Putin, 63, is seeking to minimize Russia’s reliance on markets he can’t control. Counter-sanctions imposed on food imports and an unprecedented raft of subsidies have made many areas of farming more profitable than even crude, which Putin once called Russia’s ‘golden goose.’” Contributing to recent success in food production has been grain. “Russia overtook the U.S. this year to become the biggest exporter of wheat—a milestone that followed bumper yields of corn, rice, soybeans and buckwheat. These strong harvests and Putin’s financial incentives have set off a land rush in the fabled Black Earth belt of central Russia and other fertile regions.”
********As the article notes, turning “the world’s largest country into a food colossus is a goal with a long history that faces an equally lengthy list of challenges. Soviet leaders from Lenin to Khrushchev all sought to impose sweeping changes on the industry, often with tragic results.” Contributing to those failures, of course, were the flawed biological ideas of Lysenko (https://en.wikipedia.org/wiki/Trofim_Lysenko), who endorsed Lamarck’s (https://en.wikipedia.org/wiki/Jean-Baptiste_Lamarck) notion that “acquired characteristics are inherited.” Ideas, both true and untrue, affect agricultural output.
(8 June 2016): “Neighbors Clash in Silicon Valley” [SR](http://www.wsj.com/articles/neighbors- clash-in-silicon-valley-1465291802)
------Cities in Silicon Valley are generating more jobs than housing. This is leading to conflict between the relatively small Santa Clara (120,000) and the relatively large San Jose (roughly 1 million) as Santa Clara seeks projects a development that “would add 49,000 jobs but just 16,000 housing units citywide by 2035.” San Jose “has taken the rare step of publicly opposing the project, saying it would add far too many jobs, exacerbating the region’s housing shortage.” 35
********A problem, I suspect, that many cities would like to have, although it still not easy to address. Given the challenges of affordable housing in places like Asheville, North Carolina (http://www.citizen-times.com/story/news/local/2015/04/25/ashevilles-plans-address-lack-affordable- housing/26378639/), it is clear that current approaches to urban housing need work.
36
[The Invisible Forces Weekly: Economics with a Broader View] 269 (15 June 2016)
(10 June 2016): “Finches threatened by rising rewards of trafficking trap” (http://www.pressreader.com/uk/the-guardian-weekly/20160610/282316794304202)
------“With its red face and yellow-barred black wings, the European goldfinch . . . has distinctive good looks. . . . It has been a protected species in the wild in Europe since April 1979.” But that has not stopped their capture and trade. In Europe “unscrupulous breeders are keen to extend their breeding pool by purchasing wild finch stock, despite this being illegal. Crossing a goldfinch with a canary produces a hybrid ‘mule’, wish is also a great singer.” The Internet has contributed to the goldfinch trade, as “organized crime has realised the potential rewards are considerable. On average a goldfinch will fetch €150, equivalent to €10 a gram, the same price as cannabis. But the punishment, if caught, is far less severe: a one-year prison sentence in France at worst for trapping and holding a protected species. A small-time drug-dealer risks up to five years behind bars.”
********I thought the comment about monetary yield per gram and sentencing was interesting. For someone operating on a very small scale that might be a consideration but it is hard to see that organized crime would be that interested. I’m currently reading Illicit: How Smugglers, Traffickers, and Copycats are Hijacking the Global Economy (https://www.amazon.com/Illicit-Smugglers- Traffickers-Copycats-Hijacking/dp/1400078849/), by Moises Naim, who was formerly the Editor of Foreign Policy (http://foreignpolicy.com/). No doubt it will provide some additional insight into activities such as goldfinch poaching. It definitely promises to provide detailed knowledge on money laundering, which is the flip side of the coin of illegal trade. I.e., wherever there is illegal trade, there is money laundering. No doubt the digital economy has made laundering easier. It is just now that I realized the pun employed in the television series Breaking Bad, where meth producer Walter White used a car wash to launder money.
(13 June 2016): “Detroit Battles for the Soul of Self-Driving Machines” (http://www.wsj.com/articles/detroit-battles-for-the-soul-of-self-driving-machines-1465782698)
------Detroit’s Ford Motor Company “is at the center of a ferocious hiring battle now pitting traditional car makers against startups out to force a shift to electric and autonomous-driving vehicles. As they view for skilled workers, the demand for people who know how to design or build a car has swelled, putting auto makers behind the eight ball.” Employee poaching is common, with car makers responding by “building deeper ties with universities, opening offices in Silicon Valley and buying startups.” General Motors, for example, “recently paid more than $1 billion for autonomous-driving company Cruise Automation, and acquired Sidecar Technologies 20-person team that was working on ride-hailing services.”
********A great example of what is likely to occur in a labor market when the demand for a particular skill increasing dramatically and it takes significant time to develop those skills, so supply adjusts 37
slowly. I was struck by the fact that companies, like General Motors and Toyota, seem to be focused on acquiring existing teams (workgroups) in order to speed up the development process.
(15 June 2016): “Broccoli Rabe Is Trying to Be the Next Kale” [SR](http://www.wsj.com/articles/broccoli-rabe-is-trying-to-be-the-next-kale-1465927540)
------“Broccoli rage—leafy, pungent and beloved by fans of old-school Italian-American cuisine—is emerging as a star of food blogs, Instagram feeds and the daytime television circuit, thanks to a concerted campaign to position the vegetable as the next nutritional powerhouse.” Its day in the Sun began with a question posed by Claudia Pizarro-Villalobos, the marketing and culinary manager for Salina, California-based D’Arrigo Bros., Co.: “So many other cruciferous vegetables are popular . . . Why can’t ours be more popular, too?” To draw attention to broccoli rabe, especially among coveted millennials, “the family-owned grower signed on with a small New York ad agency, Jugular, and a PR firm, LaForce, with clients mostly in fashion, lifestyle brands and spirits. It also partnered with Candice Kumai, a celebrity chef, healthy-eating cookbook author and digital influencer with a fit image, to develop recipes and talk up broccoli rabe on social media and in TV appearances.”
********Another article focusing on the demand side of the market. The production of broccoli rabe, however, can presumably increase much more quickly than the production of engineers for autonomous and electric cars. The article provides a closer look behind the emergence of a new food trend, more generally, any trend.
(15 June 2016): “Job-Seeking Ph.D. Holders Look to Life Outside School” [SR](http://www.wsj.com/articles/job-seeking-ph-d-holders-look-to-life-outside-school-1465924943)
------“Jake Simson, a biomedical engineer turned financial analyst, stood before a group of doctoral candidates in a University of Chicago lecture hall this past semester explaining how to find a job. First step? Don’t be hung up on staying in academia.” Simson’s message “is part of a conversation taking place across dozens of research universities that is aimed at preparing doctoral candidates entering the job market for a jarring reality: Their Ph.D. doesn’t deliver the bang for the buck it once did.” According to a survey of the National Science Foundation released in April, “The percentage of new doctorate recipients without jobs or plans for further study climbed to 39% in 2014 from 31% in 2009.” Furthermore, median salaries “for midcareer Ph.D. working full time declined 6% between 2010 and 2013.” A changing market for Ph.D.s has contributed to these developments. The “academic job market—the largest employer of Ph.D.s—continues to wither as many schools move away from the model of only employing tenured professors and toward using larger numbers of relatively lowly paid adjuncts.” In the private sector, too, jobs have become more scarce. “The pharmaceutical industry—the largest employer of chemists in the country—has moved much of its research overseas, shedding 300,000 jobs in the U.S. in recent years.” Kelly Brown, who is assistant director at the University of California Humanities Research Institute, notes that in the humanities, 38
only “Ph.D.s graduating from top-tier universities stand a real chance of landing a tenure-track position.”
********The message is pretty clear, those pursuing the Ph.D. should be open to and investigate a wide variety of employment opportunities, not solely those in academia. Evidently graduate schools are aware of the situation and are working to respond to it. For example, “At Stanford University, a program is in its second year to help Ph.D. graduates find jobs as high-school teachers. . . . at Columbia University, Ph.D.s are taking classes in using Twitter to better communicate their work to nonacademic audiences.” I suspect that options like these are not what led students to earn a Ph.D.
********In the event that a newly-minted Ph.D. ends up in a high-school class or even in a university classroom, it would be good to know that “the best teachers are made, not born.” There is a useful Briefing in The Economist “Teaching the teachers” on this topic: http://www.economist.com/news/briefing/21700385-great-teaching-has-long-been-seen-innate-skill- reformers-are-showing-best.
39
[The Invisible Forces Weekly: Economics with a Broader View] 270 (22 June 2016)
(18 June 2016): “The economics of Broadway: No business like show business” (http://www.economist.com/news/business/21700674-our-analysis-art-and-science-creating-hit-show- no-business-show-business)
------The hip-hop musical “Hamilton” serves “as a reminder that although Broadway is rarely regarded as a big business in the same way as Hollywood is, the most successful musicals can outperform the silver screen. No film has ever banked $1 billion at the box office in North America, but three musicals . . . have exceeded this benchmark on Broadway, admittedly over long runs. The gap widens further when counting performances worldwide. Andrew Lloyd Webber’s ‘Phantom’ began life on the London stage in 1986 before transferring to Broadway and beyond. It has earned $6 billion globally, more than twice the worldwide take of ‘Avatar’, the film industry’s record-holder.”
********The Economist examined a data set of the Broadway League that shows “weekly revenue and attendance figures for every show going back to 1984” to examine a variety of factors that would affect the likely financial success of a production. “Two approaches appear relatively reliable paths to triumph on Broadway. One is to put successful films on the stage. . . . A second tried-and-tested approach is to bring in a Hollywood star.” The musical “Hamilton” has neither. But what it “does have is a proven hitmaker in [Lin-Manuel Miranda, whose] . . . previous musical, ‘In the Heights’, won four Tony awards” and had revenues exceeding $100 million. The statistical (logistic regression) analysis used to examine the data is discussed at: http://www.economist.com/broadway-business. This seems like a great starting point for further study for a variety of productions.
(20 June 2016): “The Panama Canal Expands” (http://www.wsj.com/articles/the-panama-canal- expands-1466378348)
------On June 26 the Panama Canal expansion will open amid “one of the worst shipping industry slumps ever. While it won’t do anything to help the dire state of the industry near-term, the changes are critical to Western trade in the long run. . . . The nine-year, $5.4 billion expansion more than doubles the canal’s cargo capacity. A third lane has been added to the canal that accommodates ships large enough to carry up to 14,000 containers, compared with around 5,000 currently. . . . It is expected to shift about 10% of the Asia-to-U.S. container traffic from West Coast ports to East Coast terminals by 2020, according to a recent report.”
********The very largest container ships, which can haul up to 20,000 containers, will not be able to use the expanded Panama Canal, but those ships tend to be confined to routes between Asia and Europe. The article is visually appealing, with maps and a two-minute video discussing the history and current configuration of the Canal. As alluded to in the article, the expansion is likely to increase the demand for East Coast (U.S.) port facilities, decrease the demand for West Coast port facilities, and decrease the demand for land-based transportation services moving goods west to east. 40
********Another factor that will affect the demand for East and West Coast port facilities is the Trans-Pacific Partnership (TPP). You can read an update on the TPP in an interview with U.S. Trade Representative Michael Froman at http://www.wsj.com/articles/michael-froman-tells-where-the-tpp- stands-1466388124.
(22 June 2016): “Federal panel approves first test of CRISPR editing in humans” (https://www.washingtonpost.com/news/to-your-health/wp/2016/06/21/federal-panel-approves-first- test-of-crispr-editing-in-humans/)
------“A National Institutes of Health advisory panel on Tuesday approved the first human use of the gene-editing technology CRISPR, for a study designed to target three types of cancer and funded by tech billionaire Sean Parker’s new cancer institute. The experiment, proposed by researchers at the University of Pennsylvania, would use CRISPR-Cas9 technology to modify patients’ own T cells to make them more effective in attacking melanoma, multiple myeloma and sarcoma. . . . The experiment still must be approved by the Food and Drug Administration, which regulate clinical trials.”
********Gene editing in humans is surely on its way. The recent book The Gene: An Intimate History (https://www.amazon.com/Gene-Intimate-History-Siddhartha-Mukherjee/dp/1476733503/), by Siddhartha Mukherjee, provides some popular background for these developments.
********While we are on the subject of technological change, Bloomberg Businessweek has an interesting article on “How Intel Makes a Chip” (http://www.bloomberg.com/news/articles/2016-06- 09/how-intel-makes-a-chip) that is worth a look. The scale (nanometers) at which chip production works is breathtaking. The additive manufacturing (http://additivemanufacturing.com/basics/) of 3-D printing and the manufacturing of chips seem related.
(22 June 2016): “Preexisting Condition” [SR](http://www.wsj.com/articles/preexisting-condition- 1466548802)
------[A review, by Patrick Allitt, of Love Canal: A Toxic History from Colonial Times to the Present, by Richard S. Newman.] “Between 1942 and 1953, the Hooker Chemical Co. dumped thousands of 55-gallon drums of chemical waste . . . in the bed of a disused canal. The dumping was lawful, licensed by the city government. After covering the dump with a layer of topsoil, Hooker sold it and the surrounding land to the local school board for $1, explaining what it contained and warning the board not to build there. The area’s baby-boom-era growth, however, led the board to ignore this advice. First it built a school, then it sold the rest of the land to developers, who built several hundred houses. Buyers moved in, unaware that they were living of top of barrels of dioxin, benzene and PCBs.” Ultimately, the health issues that arose led the federal government to declare an emergency and resettle home owners. In due time, Congress passed “the Comprehensive Environmental Response, Compensation, and Liability Act, better known as ‘Superfund,’ which created a nationwide process for identifying, remediating and paying for toxic-waste cleanups. It has always been 41
controversial because it imposes retrospective sanctions on polluters, making them financially liable even if their conduct, at the time of the dumping, was lawful.”
********The reviewer notes: “Mr. Newman’s ‘Love Canal’ is a superb history of what happened before, during and after the weeks in 1978 when the area made national headlines. His lucid explanation of the issues at stake shows why so many intelligent people disagreed so sharply about toxic waste in general and Love Canal in particular. Each group—residents, politicians, the EPA, the media, local academics and the chemical company—created its own narrative.” You can learn more about the book at: https://www.amazon.com/gp/product/0195374835/. Wikipedia also has a useful entry at: https://en.wikipedia.org/wiki/Love_Canal. Allitt concludes his review, writing that Newman’s “book is a wonderful study in ‘contested memories’ and a sophisticated addition to American environmental history.”
********Asheville, North Carolina has long had its own Superfund site—CTS. You can read a recent article at: http://www.citizen-times.com/story/news/local/2016/05/16/epa-eyes-new-parties-superfund- site/84458196/. You can learn more about the site from the EPA at: https://cumulis.epa.gov/supercpad/cursites/csitinfo.cfm?id=0402598.
(22 June 2016): “Not Just the 1%: The Upper Middle Class Is Larger and Richer Than Ever” (http://blogs.wsj.com/economics/2016/06/21/not-just-the-1-the-upper-middle-class-is-larger-and- richer-than-ever/)
------“A range of data after the recession and the housing bust supported the idea that only a tiny elite of U.S. society, generally seen as the top 1%, had rebounded and was doing well. But a growing body of evidence suggest the economic expansion since the 2007-2009 financial crisis has enriched a much larger swath of the upper middle class, and that a deeper income divide is developing between that top quarter or so of the population and everyone else.” According to evidence from Stephen Rose of the Urban Institute, “the upper middle class has expanded from about 12% of the population in 1979 to a new record of nearly 30% as of 2014.”
********Interesting information given the current political discussions. The author of this article points out that there is no universally accepted definition of upper middle class, so that might raise an issue. However, the article provides a valuable reminder that it is necessary to look at the whole picture and not simply focus on one part of it. You can learn more about “The Growing Size and Incomes of the Upper Middle Class” (and download the 28-page report) at: http://www.urban.org/research/publication/growing-size-and-incomes-upper-middle-class.
(22 June 2016): “Is It Ever OK to Quit on the Spot?” (http://www.wsj.com/articles/is-it-ever-ok-to- quit-on-the-spot-1466531589)
------“For almost all of us, there comes a moment when we are tempted to quit our jobs on the spot. A growing number are actually doing it, many employers say. Some bosses blame young employees 42
who feel frustrated by limited prospects or have little sense of attachment to their workplace. But employment experts say some older workers are quitting without notice as well. They feel overworked or unappreciated after years of laboring under pay cuts and expanded workloads imposed during the recession.”
********As is alluded to in the article, quitting without notice is invited by firing without notice. No doubt, both of these behaviors are increasing. Sue Shellenbarger, who author of this article, provides a list of six bulleted points to consider “Before You Quit . . .” No doubt there should be a similar list of points to consider “Before You Fire . . .” The article gives a number of examples of exit behaviors and their consequences, all of which are worthy of reflection.
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[The Invisible Forces Weekly: Economics with a Broader View] 271 (29 June 2016)
(17 June 2016): “Robert Paine, Ecologist Who Found ‘Keystone Species,’ Dies at 83” (http://www.nytimes.com/2016/06/18/science/robert-paine-ecologist-who-found-keystone-species- dies-at-83.html)
------“Robert Paine, a groundbreaking, hands-on ecologist who found that removing what he called a ‘keystone species’ from an environment could profoundly affect the fortunes of neighboring species, died on Monday in Seattle. He was 83. . . . A teacher and researcher at the University of Washington for 36 years, Dr. Paine propounded his keystone theory in 1966 after studying ochre starfish, or sea stars, as they preyed on the mussel population along the rocky shore of Makah Bay, on the tip of the Olympic Peninsula in Washington State.” Subsequently he studied otters, and “identified the predator starfish and the otters as keystone species, taking the name from the wedge-shaped apex of an arch that keeps it from collapsing.” Of Paine, Princeton ecologist Simon Levin notes that his “influence cannot be overestimated,” commenting that Paine recognized that “to understand systems one had to perturb them.” According to Peter Kareiva of UCLA, Paine “insisted on experiments in ecology at a time when others were content with simply explaining patterns. I think he turned ecology from quantitative natural history into a modern science.”
********It would be interesting to explore the relationships between the development of experimental ecology and experimental economics. JSTOR Daily also has a post on the life and work of Robert Paine: http://daily.jstor.org/how-the-keystone-species-concept-transformed-ecology/. Included is a link to Paine’s original 1966 study of the Pisaster starfish, which is 12-pages long. James MacDonald notes: “The results of Paine’s experiment were counterintuitive. Species diversity was much higher when Pisaster was present than when they were removed. . . . Pisaster maintained balance in the ecosystem by selectively eating barnacles and mussels, preventing their otherwise excessive spread.” At present, “the keystone species concept influences almost all areas of ecology. . . . The concept transformed the field of ecology. And it all started with a couple of rock pools.” What, I wonder, would be the economic equivalent of a keystone species? A particular industry or technology?
(22 June 2016): “New map shows clustering of hog, poultry operations” (http://www.newsobserver.com/news/politics-government/state-politics/article85169762.html)
********This article provides access to four maps summarizing various animal operations in North Carolina, with an emphasis on concentrated animal feeding operations (CAFOs). The maps are Overview, County, Watershed, and Census block groups. The Overview map shows the location of these operations, as well as the relative concentration of hog farms in the eastern part of the state. The County map from numerical information about the number of animals, buildings, and waste. The Watershed map shows the various watersheds of the state and numerical information (such as for the County map) for each watershed. Finally, the Census map allows the user to “drill down” to the lowest level of aggregation. I didn’t find the words of the article all that useful but I did find the maps a 44
source of insight. The maps appear to have been created by the Environmental Working Group (http://www.ewg.org/) and the Waterkeeper Alliance (http://waterkeeper.org/).
********Related to poultry operations more generally, they are likely to undergo significant changes in the future, as noted in “This could be the start to a whole new world of chicken” (https://www.washingtonpost.com/news/wonk/wp/2016/06/28/this-could-be-the-start-to-a-whole-new- world-of-chicken/). The third-largest chicken producer in the U.S. “announced Monday that it will begin killing chickens using carbon dioxide or argon gas, so they can avoid being hung upside down” on their way to slaughter, the usual practice. New guidelines, published by Perdue, indicated that the company “will expose chickens to more natural light, boost their activity levels and reduce the expectations for how fast chickens must grow.” Although there is little doubt that these practices will increase the cost of raising chickens, producers recognize that consumers are now more interested in how chickens live and die before making it to their plates.
********This last week I completed listening to 48 lectures on “The History of Ancient Egypt,” one of The Great Courses of The Teaching Company. The lecturer, Bob Brier, really knew the subject and authentically conveyed his enthusiasm for ancient Egypt. In lecture 45 he discussed “Animal Mummies.” I was astonished to learned that there were (are) millions of mummified ibises near the tomb of Imhotep, who “was one of the chief officials of the Pharaoh Djoser” and is thought to have designed Djoser’s step pyramid in 2630-2611 BCE (https://en.wikipedia.org/wiki/Imhotep). Evidently Egypt had farms that produced ibises that were mummified and sold to pilgrims seeking to be healed. You can learn more about the ibises in chapter 8 of Egyptian Mummies: Unraveling the Secrets of an Ancient Art (https://www.amazon.com/Egyptian-Mummies-Unraveling-Secrets- Ancient/dp/0688146244/). More general than the ibis trade, there is the book Choice Cuts: Meat Production in Ancient Egypt (https://www.amazon.com/Choice-Cuts-Production-Orientalia- Lovaniensia/dp/9068317458), by Salima Ikram. All cultures, of course, must address issues related to the production, storage, transportation, and consumption of food. Books like these help us to see our lives anew and demonstrate, I suspect, that the invisible forces are timeless (but vary over time and place).
(23 June 2016): “The ‘Anti-Business’ President Who’s Been Good for Business” (http://www.bloomberg.com/features/2016-obama-anti-business-president/)
********This is a somewhat-lengthy interview with President Obama conducted by three members of Bloomberg-related enterprises at the White House. In it the President discusses some of the economic history that has coincided with his time in office and provides some broader perspective of what it is like to be President at this time. It struck me that he has a good grasp of many of the reasons why citizens in the U.S. and Europe are angry, and shows that there are things that business leaders and others could do about them. In part, his thinking shows that the U.S. and others have not dealt well enough with what should have been anticipated consequences of prior free-trade agreements. Surely his presidency illustrates the constraints upon executive action that are imposed by the legislative and 45
judicial branches of government. The Founding Fathers, I suspect, would have said that was how it was supposed to work.
(24 June 2016): “South Carolina Will Get Boost From Expanded Panama Canal” ([SR]http://www.wsj.com/articles/south-carolina-will-get-boost-from-expanded-panama-canal- 1466674203)
------“When the Panama Canal opens up a new lane for bigger ships this month, much of the cargo they carry will be headed for this quiet corner of the Southeast, some 200 miles inland.” Three cities in the “Upstate” part of South Carolina—Greenville, Spartanburg, and Greer—are being impacted by the opening. More than 6 million square “of warehouse space is under construction in the Greenville- Spartanburg region, a scale typically seen in major cities like Philadelphia and St. Louis, according to CBRE Inc., a real-estate brokerage.” From the Port of Charleston—which is dredging its harbor to be the deepest on the East Coast—container cargo makes the quick trip by rail to a freight hub in Greer, S.C., known as the Upstate’s ‘inland port.’” There trucks pick up “containers of component parts and retail goods bound for nearby factories and distribution centers. And from there, truckers can reach Atlanta or Charlotte, N.C., in two or three hours, and most of the rest of the Eastern U.S. with a day’s drive.”
********It is interesting to read that the opening of the expanded Panama Canal is expected to have significant implications for the Upstate region just down the road from Asheville. Also noted in the article are some of the environmental and social consequences of the development. Regarding the former, “Conservationists say the region’s natural landscape . . . is under threat as housing and industrial construction push further out froom the cities and transportation corridors.” Regarding the latter, “In downtown Greenville, higher-end residential and retail development . . . is forcing out some longtime residents.” In economics, as in ecology, you can never do just one thing.
(27 June 2016): “Fast-Fashion Castoffs Fuel Global Recycling Network” [SR](http://www.wsj.com/articles/fast-fashion-cast-offs-fuel-global-recycling-network-1466962488)
------In Kandla, India “thousands of tons of used clothing . . . arrive each month.” This western Indian port is “a hub in the vast global network that purchases secondhand clothes in rich countries and resells them throughout the developing world. . . . the glut springs from the rise of fast fashion, which has flooded the world with inexpensive clothing, often produced in some of the same low-wage countries where it later ends up sold in market stalls or reprocessed into goods like blankets or pillow stuffing. To some, this is a virtuous circle, minimizing waste while providing jobs and a source of low-cost clothes for the poor. . . . But some clothing makers in emerging markets say the seemingly endless supply of used apparel stifles the growth of local textile industries.”
********Apropos of the last sentence above, “India allows the processing and re-export of used clothes, but bans their sale locally, as do many other countries worried about the impact of the surging clothing trade.” Evidently, there is no used-clothing market for “Men’s pants with a waist exceeding 46
40 inches” or for women’s pants with waists exceeding 32 inches. Such pants, along with those that are stained or ripped, “are sliced up. Buttons, zippers and snaps are salvaged. Then the fabric is cut into rags for factories and garages by women who run piles of clothes through standing circular saws.” During the past year, the “cost of used clothing has fallen 30% to 50%” leading Alan Wheeler, director of the Textile Recycling Association of the UK to comment, “There is an obvious need for new markets for recycling growth.” Clothing isn’t the only recycling group dealing with falling prices: http://www.wsj.com/articles/fast-fashion-cast-offs-fuel-global-recycling-network-1466962488.
(27 June 2016): “Why We Obsess Over Other People’s Mansions” (http://daily.jstor.org/why-we- obsess-over-other-peoples-mansions/)
------“The New York Times recently reported that there are more $100 million-plus homes on the global market than ever before—and the majority of the very priciest ones are in the US. . . . Homes like these are less private refuges than showpieces designed for lavish parties. We can trace the interest in ostentatious houses among the American super-elite to late-nineteenth-century New York City.” A striking example of such display occurred in 1883 “when the Vanderbilt family celebrated the inauguration of a new mansion on Fifth Avenue by inviting 1200 people to a ‘great fancy dress ball.’” Such mansions “were closely related to another kind of opulent housing that was available to a much larger part of the public: luxury hotels. The most iconic of these was the Waldorf-Astoria.” Such opulent buildings “made the social hierarchy clear” and “let the middle class enjoy a taste of a super-wealthy lifestyle.”
********Reading Livia Gershon’s post, I am reminded of The Theory of the Leisure Class (https://www.amazon.com/Theory-Leisure-Oxford-Worlds-Classics/dp/0199552584/), by Thorstein Veblen, which was first published in 1899. Even in Chicago, I suspect, there were abundant opportunities to view extraordinary wealth on a regular basis. As it turns out, the Ritz Hotel in Paris has just reopened after extensive renovation. You can learn more about the Ritz—and view a slideshow of 24 photos, at: http://www.wsj.com/articles/can-the-newly-reopened-ritz-paris-succeed- 1466710576.
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[The Invisible Forces Weekly: Economics with a Broader View] 272 (6 July 2016)
(22 June 2016): “The secret of taste: why we like what we like” (https://www.theguardian.com/science/2016/jun/22/secret-of-taste-why-we-like-what-we-like)
********This is a review of You May Also Like: Taste in an Age of Endless Choice (https://www.amazon.com/You-May-Also-Like-Endless/dp/0307958248/), by Tom Vanderbilt. It is a “long read” of The Guardian. In conventional economics, tastes and preferences are fundamental in explaining human behavior, as are constraints on choice. The formation of tastes and preferences, however, is largely unexamined and ruled to be “outside the scope” of the discipline. Such formation tends to fall in the domains of psychology and sociology, and Vanderbilt’s book provides some guidance. In particular, chapter 8, “Why (And How) Tastes Change,” seems of particular interest.
(28 June 2016): “The Merging Worlds of Technology and Cars” (http://www.bloomberg.com/graphics/2016-merging-tech-and-cars/)
********This is a very brief article about the confluence of smartphones and cars. Its feature point, though, is the graphic which shows relationships between ride-hailing firms like Uber and Lyft, traditional auto industry firms like Ford, GM, and Toyota, and well-known tech giants like Apple and Google. Obviously much is in play regarding the future of transportation. Much of this is discussed clearly and interestingly in “Who Will Build the Next Great Car Company?” (http://fortune.com/self- driving-cars-silicon-valley-detroit/).
********Discussions of self-driving cars refer to different levels of autonomy, ranging from Level 0, where “The driver completely controls the vehicle at all times” to Level 4, where “The vehicle performs all safety-critical functions for the entire trip, with the driver not expected to control the vehicle at any time.” The five levels of autonomy—0,1,2,3, and 4—are discussed and additional content is provided at: https://en.wikipedia.org/wiki/Autonomous_car. As noted in the Fortune article, “Many experts don’t expect that the world will adopt Level 4 autonomy . . . for 25 years, or a full generational change. But partial autonomy arrived much sooner than anyone expected.”
********Another article of interest in the most recent Fortune might by title “The Merging Worlds of Technology and Banking,” although its actual title is “Here’s How Citigroup Is Embracing the ‘Fintech’ Revolution” (http://fortune.com/citigroup-fintech/). My son is now employed with online payments firm Stripe (https://stripe.com/about) after having been employed by Uber, so now I have a new firm to “notice” as I read. The article includes a graphic of the fintech universe and the markets they serve. The times they are a changing. At the end of the article, the author relates his personal experience with fintech, suggesting that there are wrinkles to be worked out.
(30 June 2016): “Hundreds of companies in the U.S. are selling unproven stem cell treatments, study says” (http://www.latimes.com/science/sciencenow/la-sci-sn-unapproved-stem-cell-treatments- 20160630-snap-story.html) 48
------“Have your weekly pickup basketball games left you with pain your knees that just won’t go away? Do you suffer from chest pain, lung disease r kidney failure? Has an accident left you with partial paralysis? Or, would you like to have a more rewarding sex life? If any of these conditions— or dozens of others—afflict you, there’s a clinic in the United States that would be happy to heal you with stem cells. From coast to coast, at least 351 businesses at 570 locations are marketing stem cell therapies that have not been fully vetted by medical researchers or blessed by the U.S. Food and Drug Administration, according to a study published Thursday in the journal Cell Stem Cell.”
********The article in question, a link for which is provided in the article, is “Selling Stem Cells in the USA: Assessing the Direct-to-Consumer Industry,” by Leigh Turner and Paul Knoepfler. You can read the article at: http://www.cell.com/cell-stem-cell/fulltext/S1934-5909(16)30157-6. The rise of stem cell clinics reminded me of the rise of pain clinics across the U.S. associated with the opioid epidemic, as described in Dreamland. I suppose that it is inevitable and unavoidable that new technologies will outrun regulatory oversight but that inaction is probably not the best approach if the health of potential consumers is of primary concern. This story was also covered by Bloomberg (http://www.bloomberg.com/news/articles/2016-06-30/stem-cell-clinics-selling-risky-treatments- explode-across-the-u-s), which has some useful additional information. In particular, it provides a link to a Paul Knoepfler’s blog The Niche (https://www.ipscell.com/). The post of June 30, 2016, which begins “Dang” is ironic in the extreme. There an image is shown of an ad for a stem cell clinic that showed up online in a media attention piece in Scientific American.
********Connected to the “Dang” post, there is a useful Op Ed in The Los Angeles Times, entitled “How we all became lab rats for American corporations and theoretical economists” (http://www.latimes.com/opinion/op-ed/la-oe-fisman-sullivan-economic-experimentation-online- 20160703-snap-story.html). Anyone who has spent much time online has had the experience of being continually chased by something about which we have expressed an interest. Of special interest in the article is the demonstrable ineffectiveness of some types of internet advertising. Amazon, of course, has been a leader in using knowledge about consumer purchases to suggest other purchases. It now appears that they are experimenting with eliminating list prices for some of its products. You can learn more at: http://www.nytimes.com/2016/07/04/business/amazon-is-quietly-eliminating-list-prices.html.
(3 July 2016): “Hillary Clinton’s Ambitious Climate Change Plan Avoids Carbon Tax” (http://www.nytimes.com/2016/07/03/us/politics/hillary-clintons-ambitious-climate-change-plan- avoids-carbon-tax.html)
------“Hillary Clinton, courting young voters and the broader Democratic base, has promised to one- up President Obama on climate change, vowing to produce a third of the nation’s electricity from renewable sources by 2027, three years faster than Mr. Obama, while spending billions of dollars to transform the energy economy.” She has promised to install a “half-billion solar panels” by 2020 and “would put the United States on track to reduce greenhouse gas emissions 80 percent from 2005 levels by 2050. . . . But Mrs. Clinton has avoided mention of the one policy that economists widely seen as 49
the most effective way to tackle climate change—and one that would need Congress’s assent: putting a price or tax on carbon emissions.” According to Robert Stavins, who heads Harvard University’s environmental economics program, “The clearest and most obvious way to reach the climate targets is with a nationwide carbon pricing method, whether a carbon tax or a cap and trade . . . But it’s not surprising, given the politics, that Secretary Clinton would not want to explicitly talk about carbon pricing.”
*******No doubt political and economic factors mutually constrain one another is an overall system. This is a clear case in which political factors constrain the economic. As the article suggests, economists generally hold that a carbon tax, which internalizes the externalities associated with the production of carbon dioxide, are the least costly way to achieve any given level of carbon dioxide reduction. All this is quite interesting given that Exxon Mobil Corp. “is ramping up its lobbying of other energy companies to support a carbon tax.” The quote can be found in “Exxon Touts Carbon Tax to Oil Industry” (http://www.wsj.com/articles/exxon-touts-carbon-tax-to-oil-industry- 1467279004).
********While we are on the subject of energy, I thought the article “Oklahoma Quakes Decline Amid Curbs on Energy Industry’s Disposal Wells” (http://www.wsj.com/articles/oklahoma-quakes- decline-amid-curbs-on-energy-industrys-disposal-wells-1467323816) was interesting. As the title indicates, “The number of earthquakes in Oklahoma has fallen 25% in 2016, compared with a year earlier, a decline attributed in part to actions by state regulators to police the oil and gas industry’s practice of pumping wastewater from its operations deep underground.” This brought to my mind the expression “states as laboratories” first noted in 1932 by Supreme Court Justice Louis Brandeis. Perhaps, when issues such as earthquake causation comes into view, the use of a randomized trials based upon different state laws might be used. Of course, different state laws are not true experiments, as is noted by James A. Gardner in Valparaiso University Law Review (http://scholar.valpo.edu/cgi/viewcontent.cgi?article=1888&context=vulr).
(5 July 2016): “New Payday Options for Making Ends Meet” (http://www.nytimes.com/2016/07/05/business/dealbook/new-payday-options-for-making-ends- meet.html)
------“For decades, most American companies have paid their workers once every week or two, minimizing the administrative costs of frequent paydays and maximizing the interest the companies earn by keeping the money in the bank. . . . But now, thanks in part to the gig economy, a small but growing number of employers and start-ups are testing ways to give employees faster access to their wages. A variety of options—some involving payroll cards, and others using A.T.M.s and other methods—have recently hit the market permitting people to take home their pay as soon as they have earned it.” 50
********The article provides a nice summary of the different options now available. It certainly suggests that there is an economic problem to be solved in determining the “best” interval for paying employees for their work. Technological change seems to suggest that the pay interval is now shorter than previously. Lower interest rates would also suggest that there is less of a reason for employers to delay payment.
********Something that caught my attention was the story of Amanda Brannon, a legal secretary who also drives for Uber on occasion. In her “day job, . . . she is happy to stick with a traditional lump-sum check.” But as Uber pays her immediately for her work, “It makes it easier to pay for the big stuff . . . Uber is perfect for daily cash, but getting paid every two weeks is good, too.” All this reminds of electricity generation—big production facilities for base load and smaller production facilities for peak loads. I suspect what Ms. Brannon does is fairly common.
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[The Invisible Forces Weekly: Economics with a Broader View] 273 (13 July 2016)
(12 May 2016): “Open the Cages!” (http://www.nybooks.com/articles/2016/05/12/humane-economy- open-the-cages/)
********On 11 July 2016 a review of The Humane Economy, by Wayne Pacelle appeared in The Wall Street Journal. The review was brief, very positive, but not accessible to non-subscribers of the Journal. Here, instead, is a lengthy review by philosopher Peter Singer, who is well-known in the academic world for his article “Animal Liberation.” Singer notes:
When my article “Animal Liberation appeared in these pages forty-three years ago, many people told me that we will not stop exploiting animals until we get rid of capitalism. Wayne Pacelle, president and CEO of the country’s largest animal protection organization, the Humane Society of the United States (HSUS), takes the opposite view. In The Humane Economy he describes how “capitalism at its best” is a force against animal suffering, “applying human creativity to answer the demands of a morally informed market.
This book will undoubtedly provide much food for thought. The review in the Journal is “The Savviest Lobbyist” [SR](http://www.wsj.com/articles/the-savviest-lobbyist-1468183798), and contains a great story about how a call from activist investor Carl Icahn helped change the policy of McDonald’s.
(7 July 2016): “More than 1 million OxyContin pills ended up in the hands of criminal and addicts. What the drugmaker knew.” (http://www.latimes.com/projects/la-me-oxycontin-part2/)
------[This article, part 2 of a series, lifts up the excessive prescribing of OxyContin by a Los Angeles-area physician.] In a single week in September 2008, Dr. Eleanor Santiago of the Lake Medical clinic “issued orders for 1,500 pills, more than entire pharmacies sold in a month. . . . By December, she had prescribed more than 73,000, with a street value of nearly $6 million.” Purdue Pharma, which makes OxyContin, knew about the situation and investigated it. Eventually it concluded that the clinic at which the physician worked “was working with a corrupt pharmacy in Huntington Park to obtain large quantities of OxyContin.” But when sales manager Michele Ringler asked company officials, “Shouldn’t the DEA be contacted about this?” no action was taken. Purdue “did not tell authorities what it knew about Lake Medical until several years later when the clinic was out of business and its leaders indicted. By that time, 1.1 million pills had spilled into the hands of Armenian mobsters, the Crips gang and other criminals.” The Lake Medical case was not an isolated one. “A Los Angeles Times investigation found that, for more than a decade, Purdue collected extensive evidence suggesting illegal trafficking of OxyContin and, in many cases, did not share it with law enforcement or cut off the flow of pills.”
********This article clearly shows how hard it can be to “Do the right thing” when doing so will reduced sales, and perhaps earnings and future career prospects. It also shows how the failure to do the 52
right thing tends to give rise to moral dilemmas for others, e.g., pharmacist Tihana Skaricic who “raised questions about prescriptions from the Lake Medical clinic.” Evidently, identifying unusual sales patterns at pharmacies was relatively easy for employees of drug companies (and the DEA) to do. What wasn’t easy was determining if there was a problem or not. For example, DEA investigators had access to a databased that “encompassed dozens of drugs sold by more than a thousand companies” but the database was unwieldy.
********Part 1 of the OxyContin series, published on 5 May 2016, can be found at: http://www.latimes.com/projects/oxycontin-part1/. Prescription pain relieve abuse has become so prevalent that it has even shown up in the comic strip “Mary Worth” (http://maryworthcomics.com/comics/july-10-2016/). Of course, Vicodin played a continuing role in the television series “House.”
********In thinking about this, the JSTOR Daily post “Why We Make Doctors Get Licenses” (http://daily.jstor.org/why-we-make-doctors-get-licenses/) is relevant. As the article points out, there was a time when doctor licensing was problematic. But the 1910 Flexner Report, “pushed the nation toward new medical licensing laws by arguing for professionalization of medical practice in the service of the social good.” As it turned out, licensing did more than serve the social good, or so Stephen J. Kunitz argued in “Professionalization and Social Control in the Progressive Era: The Case of the Flexner Report.” In that article, accessible via the post, he “describes the public health function of physician licensing as inseparable from the service of elite interests.”
(9 July 2016): “America’s forests: Ravaged woodlands” (http://www.economist.com/news/briefing/21701751-stricken-trees-provide-clues-about-how-america- will-adapt-global-warmingbut-little-hope)
------“Politicized, documented and culturally sensitive, the ravaging of America’s forests is an important gauge of man’s ability to mitigate and adapt to the warming he has caused. The scale of the tree loss is staggering. Last year over 10m of America’s 766m acres of forest were consumed by wildfires, sparked by lawn mowers, campers or lightning . . . The growth of wildfires is a worldwide problem, with even bigger burns elsewhere. Siberia, Tasmania, Canada and Indonesia have seen record-breaking fires in recent years.” Although fires have been damaging, “The devastation wreaked in American forests by insects is less headline-grabbing but ecologically as dramatic. Last month the United States Forest Service . . . said that, since October, it had recorded 26m trees killed by the mutually-reinforcing effects of bugs and drought in the southern part of California’s Sierra Nevada range alone. . . . Such destruction, caused partly by warming, will itself cause more warming.
********The invisible forces, of course, are both conditioned by and influencing of the physical environment. I.e., the invisible forces and the physical environment are part of a system. Consequently, the condition of the forests of the United States are both conditioned by the invisible 53
forces and influence them, too. What modifications of the invisible forces must take place if the ravaging of the forests is to be attenuated?
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[The Invisible Forces Weekly: Economics with a Broader View] 274 (20 July 2016)
(14 July 2016): “Grid Attack: How America Could Go Dark” [SR](http://www.wsj.com/articles/how- america-could-go-dark-1468423254)
------“The U.S. electric system is in danger of widespread blackouts lasting days, weeks or longer through the destruction of sensitive, hard-to-replace equipment. Yet records are so spotty that no government agency can offer an accurate tally of substation attacks, whether for vandalism, theft or more nefarious purposes.” Furthermore, “Most substations are unmanned and often protected chiefly by chain-link fences. Many have no electronic security, leaving attacks unnoticed until after the damage is done. Even if there are security cameras, they often prove worthless. In some cases, alarms are simply ignored.”
********The U.S. electrical grid has been the subject of much discussion in recent years due to its need to be updated to address the expanding use of renewable energy sources like solar and wind. This article points to the importance of making the grid more secure from attack for whatever reason. This is an enormous challenge as “The grid was cobbled together during the electrification of the U.S. over the past 125 years. It is a fragile, interdependent system generally more vulnerable in summer when it is running closer to its limits. It is also at risk during low-demand periods, when power plant operators and linemen perform maintenance. Fewer plants and transmission lines operating mean fewer options for delivering electricity during emergencies.” Although the Federal Energy Regulatory Commission has issued a rule to better secure the grid, “it doesn’t extend to tens of thousands of smaller substations” across the country.
********Not coincidentally, I suspect, there is a review in The Wall Street Journal [SR](http://www.wsj.com/articles/the-marvel-of-electricity-1468616241) of The Grid: The Fraying Wires Between Americans and Our Energy Future (https://www.amazon.com/Grid-Fraying-Between- Americans-Energy/dp/1608196100/), by cultural anthropologist Gretchen Bakke. As noted by reviewer R. Tyler Priest, “Gretchen Bakke explains . . . [that] a vast network that arose to provide electricity in a centralized and standardized fashion is ‘being colonized by a new logic: little, flexible, fast, adaptive local.’ The large utilities no longer enjoy a monopoly over the power that they spread across the grid.” Regulatory policies developed during the Progressive Era that emphasized power generation as a natural monopoly are no longer sufficient for current and future conditions. The book will be released on July 26th. Regrettably, I was unable to locate a copy of its Table of Contents. A related is Smart Power Anniversary Edition (2014). You can learn more about it at: https://www.amazon.com/Smart-Power-Anniversary-Electric-Utilities/dp/1610915895/.
********As noted in Bakke’s book and in the article on attacks on the grid, the grid is highly complicated, almost defying the ability of one person to comprehend it. This theme is carried over and broadened in Overcomplicated: Technology at the Limits of Comprehension (https://www.amazon.com/Overcomplicated-Technology-at-Limits-Comprehension/dp/1591847761/), 55
by applied mathematician and network scientist Samuel Arbesman. The book is review in the Journal under the heading “The Rise of the Kluges” [SR](http://www.wsj.com/articles/the-rise-of-the-kluges- 1468968418). So, what are kluges? In brief, “overly complicated, inelegant, cobbled-together messes.” They are such that “Even experts can no longer fully understand or control them.” As Arbesman notes, “From the electrical grid to Toyota’s software to online dating sites, the systems we live by are inelegant messes that no one fully understands.” So, what is to be done? “The obvious solution is to simplify our systems, but that is next to impossible. Once a system is in place it inevitably undergoes a process of accretion—feature is added to feature and new layers to old ones. . . . And so, bit by bit, a kluge is born.” According to Arbesman, “Our only hope . . . is to approach the Entanglement much as a biologist approaches the natural world. Biologists do not look for grand formulations. They conduct experiments and carefully observe. Over time they learn a great deal about the natural world.” Perhaps, over time, we will do the same for the artificial world we have created.
(16 July 2016): “Buying drugs online: Shedding light on the dark web” (http://www.economist.com/news/international/21702176-drug-trade-moving-street-online- cryptomarkets-forced-compete)
------“Though online markets still account for a small share of illicit drug sales, they are growing fast—and changing drug-dealing as they grow. Sellers are competing on price and quality, and seeking to build reputable brands. Turnover has risen from an estimated $15m-17m in 2012 to $150m- 180m in 2015. And the share of American drug-takers who have got high with the help of a website jumped from 8% in 2014 to 15% this year, according to the Global Drug Survey, an online study. Online drug markets are part of the ‘dark web’; sites only accessible through browsers such as Tor, which route communications via several computers and layers of encryption, making them almost impossible for law enforcement to track.”
********The Economist was enabled to conduct a study of dark web transactions via 1.5 terabytes of “information for around 360,000 sales between December 2013 and July 2015” obtained from a web crawler and this article reports on it. Its discussion of the role of drug price (higher online than on the street), drug quality (higher online than on the street), and shipping costs (higher online than on the street) was quite interesting. As it turned out the dollar value of the drugs MDMA and Ecstasy (combined) just nudged out marijuana, and then cocaine for the period studied. Those involved in the dark web would certainly fall under the subject matter of Illicit (https://www.amazon.com/Illicit- Smugglers-Traffickers-Copycats-Hijacking/dp/1400078849/), by Moisés Naím, which I just finished reading. I found the book a bit of an effort to read until I got to chapter 9 and beyond, were broader issues were encountered; chapters 2-7 were largely a recounting different areas where illicit activities take place. The book, however, reinforced my understanding that almost every legal market has a “shadow” illegal (illicit) market. That being the case, conventional analysis of markets, which is carried out on the implicit assumption that all transactions are legal, would benefit from considering the adjacent illegal markets. This is a natural way to bring the invisible foot—legal and political 56
forces—into everyday economic analysis. It is also a natural way to bring the invisible handshake— social and historical forces—into the analysis. From the handshake the role of ethics and religion are immediate.
********The article reminded me of “You Can Lose Out Just Being Associated With Pot” (http://www.bloomberg.com/news/articles/2016-07-08/you-can-lose-out-just-being-associated-with- pot), which discusses some of the unanticipated consequences of being associated with the marijuana industry. A case in point is Derek Peterson, the CEO of Terra Tech, a publicly traded pot company. Peterson lost his application for life insurance from Mutual of Omaha because of his employment.
(18 July 2016): “Report: NC’s regional disparities, income gaps growing” (http://www.newsobserver.com/news/business/article90354967.html)
------“N.C. State University economist Michael Walden’s biannual economic diagnosis for the state warns that much of North Carolina’s post-recession growth is bypassing the so-called ‘routine’ middle- income vocations and exacerbating the state’s growing regional gap and income inequality. Walden’s report . . . shows that the most dramatic job growth in the state has taken place at the extremes of the pay scale.” Said Walden, “The routine jobs are much more being taken over by technology . . . The changes in economic structure are really behind the regional disparities that we see.” According to Walden, “Ret[r]aining displaced workers and training new workers for the jobs of the future will require a significant commitment from the state to avoid massive ‘technological unemployment.’”
********It is interesting to see at the state level changes that are taking place nationally and globally. You can read the 22-page “Economic Outlook” prepared by Walden at: http://pulse.ncpolicywatch.org/wp-content/uploads/2016/07/Mike-Walden-Economic-Outlook-July- 2016.pdf. On page 18 of the report it is noted that “Unfortunately, one region—the Rocky Mount metropolitan area—has continued to lose payroll employment since 2010.” No doubt that is one reason why Rocky Mount (successfully) pursued the location of the just-announced $272 million CSX rail hub and its 149 jobs averaging $64,000 each. You can learn more about the hub at: http://www.newsobserver.com/news/local/counties/johnston-county/article90484642.html.
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[The Invisible Forces Weekly: Economics with a Broader View] 275 (27 July 2016)
(20 July 2016): “Tesla Autopilot crash won’t halt self-driving car development, NHTSA says” (http://www.cnet.com/roadshow/news/tesla-autopilot-crash-wont-halt-self-driving-car-development/)
------“Despite a fatal crash involving a Tesla Model S being driven by its Autopilot feature, the US National Highway Transportation Safety Administration’s (NHTSA) head Mark Rosekind insisted that the government would still work to promote self-driving cars by providing a framework in which develop can continue.” Rosekind commented, “No one incident will stop the NHTSA from promoting highly automated driving development.” He went on to suggest that “the NHTSA was willing to accept imperfect technology during development of highly automated driving because of its vast life- saving potential.”
********I found it refreshing to read that the current state of “imperfect” technology was not going to put “the kibosh” on development. It reminds me, once more, of the importance of technological change and how tempting it must be to use the invisible foot—legal and political forces—to hinder those changes. What is the “mix” of the invisible forces that enhance technological change (or its opposite)? The NHTSA head’s approach seems practical and far-sighted. I was led to this article by a similar article in The Wall Street Journal at: [SR](http://www.wsj.com/articles/tesla-autopilot-crash- shouldnt-slow-self-driving-development-regulator-says-1469200956).
(21 July 2016): “Letting Markets Guide Adaptation to Climate Change” (http://www.nytimes.com/2016/07/21/upshot/letting-markets-guide-adaptation-to-climate- change.html)
------[An Upshot article by Michael Greenstone, an economist at the University of Chicago.] “We are on course to set another record for the hottest year, the third year in a row, and 2016 may well have the most billion-dollar weather disasters. . . . Climate change is projected to bring more frequent damaging storms, with high winds and flooding.” Although insurance markets provide incentives to adapt to climate chance, “in too many states, well-intentioned regulations aren’t letting the market properly price climate risk.” Florida is a case in point. There “regulations cap premiums—forcing inland areas to pay more for wind insurance, while the coastal residents don’t pay premiums reflecting their higher risks.” This contrasts with California, “a state at high risk for earthquakes.” There the California Earthquake Authority “prices its premiums according to each policyholder’s risk for earthquake damages.” Such premiums “reflect careful risk assessments based on the best available science and characteristics of the house, including proximity to fault lines.” In this case, homeowners facing higher risk of earthquake damages pay higher premiums. But those premiums can be reduced by homeowner action to reduce risk. In such a regulatory environment, the market “works as it should.”
********I do not know how such insurance functions in North Carolina. I took a look at the site of the North Carolina Department of Insurance (http://www.ncdoi.com/), which covers all types of 58
insurance. After some browsing, I identified the NCDOI HurriClaims Center (http://www.ncdoi.com/HurriClaims/) as a potential information source. Prior to identifying the site, I came across a policy report on “North Carolina’s Beach Plan: Who pays for Coastal Property Insurance?” (http://www.johnlocke.org/acrobat/policyReports/beach_plan_reform.pdf), by the John Locke Foundation. This is not a source I would ordinarily trust, but my scan of it indicates that it is a knowledgeable and reasoned attempt to deal with an important policy issue.
(22 July 2016): “In Backyard of RNC, Drugs, Vanishing Jobs Strain Rural America” (http://www.bloomberg.com/news/articles/2016-07-22/in-backyard-of-rnc-drugs-vanishing-jobs-strain- rural-america)
------The U.S. Department of Agriculture was created “in the mid-19th century to ensure the future of farming, [but] it’s becoming Uncle Sam’s lead tool to fight a social emergency—soaring drug use, rising suicide rates and deepening poverty—spreading across the heartland.” According to USDA Secretary Tom Vilsack, “We’re charged with the responsibility of filling the gap to make sure rural America hasn’t been forgotten.” The tapping of the USDA “for the job underscores a broader point: The government, like the wider culture, is much more attuned to the problems of urban areas where most Americans live.
********What caught my attention about the article is the broadening of the scope of the work of the USDA to include matters that might ordinarily be thought of as falling under the responsibilities of the Department of Health and Human Services. It is almost as if the USDA is being viewed as focusing on “all things rural.”
(22 July 2016): “The Incalculable Value of Finding a Job You Love” (http://www.nytimes.com/2016/07/24/upshot/first-rule-of-the-job-hunt-find-something-you-love-to- do.html)
------[An article for “The Upshot” by Cornell economist Robert H. Frank.] My “first response when students seek advice on how to succeed is to ask whether any activity has ever absorbed them completely. Most answer affirmatively. I then suggest that they prepare themselves for a career that entails tasks as similar as possible to that activity, even if it doesn’t normally lead to high financial rewards. I tell them not to worry about the money. My point is that becoming an expert is so challenging that you are unlikely to expend the necessary effort unless the task is one that you love for its own sake. If it is, the process will be rewarding apart from whether it leads to high pay.”
********As Frank goes on to note, although there are no guarantees that you’ll become “the best” at what you do, “by choosing to concentrate on a task you love, you’ll enjoy the considerable proportion of your life that you spend at work, which is much more than billions of others can say.” Social science findings “establish clearly that once you have met your basic obligations, it’s possible to live a very satisfying life even if you don’t earn a lot of money.” Of course, some people get to do both. 59
(23 July 2016): “Payday Loan Limits May Cut Abuse but Leave Some Borrowers Looking” (http://www.nytimes.com/2016/07/23/business/dealbook/payday-loan-limits-may-cut-abuse-but-leave- some-borrowers-looking.html)
------“The Consumer Financial Protection Bureau, the watchdog agency set up after the last financial crisis, is poised to adopt strict new national rules that will curtail payday lending.” But lenders like Tanya Alazaus, who operates an Advance America shop in Canton, Ohio, “and even some consumer advocates who favor stronger regulation . . . are grappling with the uncomfortable question of what will happen to customers . . . if a financial lifeline that they rely on is cut off.” There is reason to be concerned. “A sweeping study of bans on payday lending, scheduled to be published soon in The Journal of Law and Economics . . . [concluded that when] short-term loans disappear, the need that drive demand for them does not; many customers simply shift to other expensive forms of credit like pawn shops, or pay late fees on overdue bills.”
********The article has a variety of interesting twists that indicate the challenges associated with writing rules in reference to legislation of the kind that the created the CFPB that specifically prohibits certain kinds of rules. As noted, in the present case rules emerge that “are a messy compromise that both sides hate.”
********This is probably as good an account of some of the issues surrounding payday loans as I have found in the media. Among other things, it provides a number of very useful links. Here are three. A clear summary of some aspects of payday loans can be found at: http://libertystreeteconomics.newyorkfed.org/2015/10/reframing-the-debate-about-payday- lending.html#.V5N_1LgrJhE. The proposed rules of the CFPB can be viewed at: http://files.consumerfinance.gov/f/documents/CFPB_Proposes_Rule_End_Payday_Debt_Traps.pdf. The paper that will appear in The JLE can be accessed at: http://www.human.cornell.edu/pam/people/upload/Bhutta_Goldin_Homonoff7-13-2016.pdf.
(23 July 2016): “Information asymmetry: Secrets and agents” (http://www.economist.com/news/economics-brief/21702428-george-akerlofs-1970-paper-market- lemons-foundation-stone-information)
********This is the first of six “Economics Briefs” to appear in The Economist. It focuses on the epochal (1970) paper “The Market for Lemons,” by Nobel Laureate George Akerlof, who also happens to be married to Janet Yellen, who is the chairman of the Federal Reserve. Akerlof introduced the notion of informational asymmetry in an analytically important way, thereby blazing a trail that many others have trod, including Michael Spence and Joseph Stiglitz, both winners of the Nobel prize in economics. You can see the list of “Six big economic ideas” and other material at: http://www.economist.com/economics-briefs. You can access the lemons article at: https://www.iei.liu.se/nek/730g83/artiklar/1.328833/AkerlofMarketforLemons.pdf. 60
********Every important paper has a story behind it and “Lemons” is no exception. You can read the story behind Akerlof’s paper, which he wrote in his first year as an assistant professor at UC-Berkeley, at: http://www.nobelprize.org/nobel_prizes/economic-sciences/laureates/2001/akerlof-article.html. It reminded me of a passage by Rainer Maria Rilke (http://www.onbeing.org/program/wild-love- world/feature/go-limits-your-longing/1448):
Let everything happen to you: beauty and terror. Just keep going. No feeling is final. Easier to write than to practice, but in the face of three rejections from the “commanding heights” of the economics profession, Akerlof kept going.
(26 July 2016): “Why It’s So Hard to Build Affordable Housing: It’s Not Affordable” (http://www.bloomberg.com/news/articles/2016-07-26/why-it-s-so-hard-to-build-affordable-housing- it-s-not-affordable)
********The City of Asheville, North Carolina has long been concerned about affordable housing. Likewise, how to “best use” publically owned land, especially in the downtown area, continues to be of interest. Consequently, this article and its various links struck me as noteworthy and potentially useful. For example, it provides a variety of statistics from the National Low Income Housing Coalition indicating how large the “gap” is. From the Urban Institute, an online simulator illustrates “the challenges of building new affordable housing.” It shows that “No matter how you slice it, creating the affordable housing needed today probably requires government help. . . . Playing with the simulator, you quickly learn that there are only a few levers that truly affect a developer’s ability to finance a project.”
********The article concludes with the comment “There’s also another way to create housing for the poorest renters, which is to build housing for higher wage-earners, freeing up older, lesser-quality units through a process called filtering.” As Reihan Salam, who is a policy fellow at the National Review Institute, the filtering approach is “not always politically attractive, because you’re talking about housing that has deteriorated a bit . . . That’s basically how housing markets have always worked.” The notion of filtering evokes a memory of “trickle-down economics” in an obvious way. Here is the article that discusses filtering in detail (https://www.bloomberg.com/view/articles/2016-05-18/want- cheap-rents-build-expensive-housing-then-wait). It has a clear discussion of different housing quality in relation to short- and long-term aspects.
********Affordable housing, as conventionally characterized, is not the only housing issue. Facebook is looking to employ an addition 6,500 workers at its Menlo Park, California headquarters. But where to house these people? To help increase housing, Facebook pledged, earlier this month, to “build at least 1,500 units of housing, meant not specifically for Facebook employees, but for the general public. . . . Under the plan, 15% of the units would be reserved for low- or middle-income families.” Other tech giants, like Google, are watching to see what becomes of this. More detail is 61
provided in “Facebook’s (Answer to Silicon Valley Housing Crunch: Build Apartments” [SR](http://www.wsj.com/articles/facebooks-answer-to-silicon-valley-housing-crunch-build- apartments-1469534402).
(26 July 2016): “Crude Slump, Pipeline Expansion Mark End of U.S. Oil-Train Boom” (http://www.wsj.com/articles/crude-slump-pipeline-expansion-mark-end-of-u-s-oil-train-boom- 1469484016)
------“The oil-train boom is waning almost as quickly as it began. Rail became a major way to move crude after companies began unlocking new bounties of oil from shale formations, with volumes rising from almost nothing in 2009 to more than one million barrels a day by 2014 . . . But those numbers began falling after oil prices started tumbling two years ago, and aren’t projected to recover anytime soon.” Contributing to the decline has been the building of new oil pipelines. “More pipelines have begun reaching North Dakota and other shale regions, giving producers a cheaper way to move their oil to market. Also, a string of fiery crude-freight-train derailments . . . have prompted a host of new and expensive regulations . . . The changes are evident in North Dakota, once the epicenter of the crude-by-rail trend.” Oil output has “fallen by 180,000 barrels a day from its 2014 peak. Meanwhile, pipeline takeaway capacity has more than doubled since 2010.”
********The article has a nice bar graph showing crude oil shipped by rail from 2010 to early 2016. My eyeballing of it indicates that the April 2016 shipments are the lowest since June 2012. The article points out nicely two points: (1) even in the short run, there are alternative ways to move oil, and (2) as the long run emerges, additional alternatives to moving oil emerge. Nothing earthshaking here, as this is simply a statement of two well-worn economic principles, but sometimes a reminder is useful.
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[The Invisible Forces Weekly: Economics with a Broader View] 276 (3 August 2016)
(28 July 2016): “Why Do Sports Make Sane People Lost Their (Economic) Minds?” (http://www.bloomberg.com/news/articles/2016-07-28/why-do-sports-make-sane-people-lose-their- economic-minds)
********This link provides access to a 24-minute podcast by Bloomberg Benchmark. The occasion for the podcast is the incipient Summer Olympics at Rio de Janeiro. In light of the recent history of the Summer Olympics, one has to question the sanity of cities who actively seek to host the Olympics. Yet they do. Most likely, they will continue to do so. The podcast is built around an interview with “Neil de Mause, an expert in the world of publicly financed sports facilities.” De Mause and Joanna Cagan are the authors of Field of Schemes: How the Great Stadium Swindle turns Public Money into Private Profit, revised and expanded edition (https://www.amazon.com/dp/0803260164/). De Mause argues that the likelihood of a publicly-financed stadium for a sports franchise “paying off” is effectively nil. Furthermore, the oft-stated concern that the loss of a sports team due to not building a stadium will lead to the loss of political position, e.g., mayor of a city, has no evidence to support it. It is more likely that politicians will lose their positions from approving a stadium. No doubt, the book develops the argument at some length. There seems to be a more general question lurking behind the narrower question of whether or not to approve a sports stadium.
(28 July 2016): “An Auction House Learns the Art of Shadow Banking” (http://www.bloomberg.com/news/articles/2016-07-28/art-of-shadow-banking-how-an-auction-house- got-into-the-picture)
------“Malaysian financier and art buyer Low Taek Jho . . . was looking to borrow more than $100 million without having to answer all the nosy questions big U.S. banks are required to ask.” Instead he “sent an e-mail in March 2014 to an employee of an art dealership saying he wanted a lender with a ‘fairly quick and relaxed kyc process’—a reference to the know-your-customer rules designed to curb money laundering. Low got his money a month later, not from a bank but from Sotheby’s, an auction house that isn’t subject to the same money-laundering scrutiny by regulators.” In an era of skyrocketing are prices, “Sotheby’s and other boutique lenders have become a new kind of shadow bank, a term for companies that offer financing without being regulated like banks. This has raised concerns that such financing could facilitate money laundering.” According to David Hall, who spent ten years as a special prosecutor of the Art Crime Team of the FBI, “One way to launder [money] is to use art as security for a loan. . . . The level of scrutiny you’ll receive from a bank is much higher that you will receive from an auction house.”
********According Jane Levine, a spokeswoman for Sotheby’s, the auction house does have a compliance program that “looks into a client’s source of wealth and evaluates risk in a manner in a manner analogous to financial institutions.” Nevertheless, the company is “not covered by the strict reporting requirements of the Bank Secrecy Act or supervised as deposit-taking institutions by federal 63
banking regulators.” You can learn more about the use of art to launder money in Money Laundering Through Art: A Criminal Justice Perspective (https://www.amazon.com/Money-Laundering-Through- Art-Perspective-ebook/dp/B00DA0OXOQ/), by Fausto Martin De Sanctis. Money laundering is of particular interest to U.S. Immigration and Customs Enforcement (https://www.ice.gov/money- laundering), although it appears that the FBI is reasserting itself in that area (https://www.fbi.gov/audio-repository/news-podcasts-thisweek-fbi-revamps-money-laundering- investigations.mp3/view).
********The U.S. Department of the Treasury has a significant involvement in the area of money laundering enforcement (https://www.treasury.gov/resource-center/terrorist-illicit- finance/Pages/Money-Laundering.aspx). It was interesting to see its pdf “Money Laundering through the Football Sector” (https://www.treasury.gov/resource-center/terrorist-illicit-finance/Documents/ML- football-sector_072009.pdf). In this instance “football” is what an American would call “soccer.”
(30 July 2016): “Financial stability: Minsky’s moment” (http://www.economist.com/news/economics- brief/21702740-second-article-our-series-seminal-economic-ideas-looks-hyman-minskys)
------[The second of six briefs on economics.] “From the start of his academic career academic career in the 1950s until 1996, when he died, Hyman Minsky laboured in relative obscurity. His research about financial crises and their causes attracted a few devoted admirers but little mainstream attention . . . So it remained until 2007, when the subprime-mortgage crisis erupted in America. Suddenly, it seemed that everyone was turning to his writings as they tried to make sense of the mayhem. Brokers wrote notes to clients about the ‘Minsky moment’ engulfing financial markets. Central bankers referred to his theories in their speeches. And he became a posthumous media start, with just about every major outlet giving column space and airtime to his ideas.” At the root of Minsky’s ideas is a firm’s investment funds “can come from one of two sources: the firm’s own cash or that of others . . . The balance between the two is the key question for the financial system.” He then went on to distinguish between three kinds of financing: “hedge financing,” which is the safest, “speculative financing,” which is a bit riskier, and “Ponzi financing,” the riskiest of all. The ability of each type of financing to cover (or not) the principal and interest of a loan plays a central role in the stability (instability) of the financial system.
********I’m not knowledgeable about Minsky’s work but The Economist makes a good case for learning more. You can learn more about the life and work of Hyman Minsky at: https://en.wikipedia.org/wiki/Hyman_Minsky.
(1 August 2016): “Russia’s Acres, if Not Its Locals, Beckon Chinese Farmers” (http://www.nytimes.com/2016/08/01/world/asia/russia-china-farmers.html)
********This articles take a look at land use in far-eastern Russia and neighboring China. It lifts up issues of motivation to work as well as the continuing impact of agricultural collectivization in Russia. It is a place where “local officials and many residents, while grumbling that they cannot keep up with 64
Chinese work habits, tend to see China and its vast pool of industrious labor as the best hope of developing impoverished regions that often feel neglected by Moscow.” As Lyudmilla Voron notes, “Our own people have been spoiled . . . The (Russian) men drink too much and don’t want to work.” I was interested to see the presence of the “Jewish Autonomous Region” on the map provided. There is a link provided to obtain more information about it.
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[The Invisible Forces Weekly: Economics with a Broader View] 277 (10 August 2016)
(4 August 2016): “The Hottest Start-Up Market? Baby Boomers” (http://www.nytimes.com/2016/08/04/business/smallbusiness/the-hottest-start-up-market-baby- boomers.html)
------“With an estimated 74.9 million baby boomers, according to Pew Research Center, the biggest market opportunity for start-ups is older Americans rather than hip millennials. As members of the generation that defined rock ‘n’ roll grow older, they are adding a wide range of goods and services to their lifestyles.” Boomers are a large part of the so-called “longevity” market, i.e., “the over-50 demographic . . . whose annual economic activity currently amounts to $7.6 trillion, according to AARP. . . . The staggering size of the total longevity economy . . . has been attracting more entrepreneurs, deep-pocketed financiers and places to pitch new ideas in the past few years.” Boris Mordkovich is one of those entrepreneurs. He and his brother Yevgeniy founded the electric bike company Evelo, which is profitable and is projected to double its revenue to $4 million. Regarding the bike, he notes: “Electric bikes are an equalizer . . . They let the rider decide how much or how little they will pedal.” Funding for start-ups, like Evelo, seems to be readily available as more venture capitalists recognize the opportunities provided by the longevity market.
********This article addresses the consumption habits of Baby Boomers. In a related article, “For Economy, Aging Population Poses Double Whammy,” by Wall Street Journal columnist Greg Ip [SR](http://www.wsj.com/articles/for-economy-aging-population-poses-double-whammy- 1470249965), some of the negative consequences of Boomers retirees are examined. He notes, “Economists have long expected an aging population to hamper growth for the simple reason that it means a smaller labor force. But new research has identified a potentially more powerful impact: Rapid retirements deprive companies of critical experience and knowledge, which undermines productivity across the entire economy.” An examination of the consequences of an aging population is provided by “a new paper by Nicole Maestas of Harvard University and Kathleen Mullen and David Powell of the Rand Corp., a think tank. Because the 50 states are aging at different rates, they were able to tease out the impact of aging on economic growth. Their conclusion: On average, every 10% increase in the share of state’s population over the age of 60 reduced per capital growth in [state] gross domestic product by 5.5%.”
********The article by Maestas, Mullen, and Powell is “The Effect of Population Aging on Economic Growth, the Labor Force and Productivity” can be read at: http://www.nber.org/papers/w22452.
(5 August 2016): “Colombia’s New, Legal Drug Barons Focus on Medical Marijuana” (http://www.nytimes.com/2016/08/05/business/international/colombia-medical-marijuana-drugs.html)
------“Like many drug barons in Colombia, Federico Cock-Correa wants to sell his product globally. Just 15 miles outside Medellin, Mr. Cock-Correa is looking to replace vast acres of flowers with marijuana plants, with plans to export the harvest. But unlike the brutal heroin and cocaine trade that 66
once flourished nearby, his operation has the government’s stamp of approval.” During the last year Colombia overhauled 30-year-old drug laws, formally legalizing medical marijuana for domestic use and allowing “the commercial cultivation, processing and export of medical marijuana products—like oils and creams—although not the flower, the part of the plant normally rolled into a joint.” One company looking to benefit from the legal change is Toronto-based PharmaCielo, which has received a license “to manufacture cannabis products . . . [and] is still waiting for licenses for cultivation. . . . Once it receives approval, PharmaCielo will start growing marijuana and then process the material into medical products that can be exported to Canada and other countries that allow the importation of medical cannabis. The United States, for now, remains a long way off.” When production is fully underway, “PharmaCielo expects to produce a gram of marijuana flowers for about 5 cents. The same amount costs at least 10 times as much to produce in the United States and Canada.”
********The cost differences for growing marijuana flowers are dramatic and stem from geography, climate, and soil. Since the equator runs through Colombia, as it does for Ecuador and Brazil (and some other countries), days and nights tend to be near 12 hours each, thereby keeping plants in the vegetative state in which flowers grow for longer periods of time and without artificial lighting. To achieve the same results in the U.S. or Canada, extensive use of artificial lighting must be made, hence one dimension of the production cost differential.
********There is, of course, an extensive back story to this article, one that includes Colombia’s historical role in the production of cocaine, Colombia’s role as a large supplier of cut flowers, e.g., and the slow evolution of legal marijuana, medical and otherwise, in the U.S. and Canada. As Colombian growers redeploy their resources from cut flowers to marijuana, no doubt the short-run effect will be higher flower prices, although longer term some flower production will likely increase elsewhere. Likewise, it is easy to see a day when a U.S. marijuana trade group lobbies hard against the importation of marijuana into the country, possibly even seeking to increase penalties on those who smuggle it into the country. I’ve been reading, as part of my efforts to become better informed on the global market for illegal drugs, Cocaine: An Unauthorized Biography (https://www.amazon.com/Cocaine-Unauthorized-Biography-Dominic-Streatfeild/dp/0312286244/), by Dominic Streatfeild, and it does a nice job of providing background for the development of cocaine products and Colombia’s role in it. It has been an engaging read and shows many of the impacts that the cocaine trade has had in the U.S. and globally.
(5 August 2016): “This Company Has Built a Profile on Every American Adult” (http://www.bloomberg.com/news/articles/2016-08-05/this-company-has-built-a-profile-on-every- american-adult)
------“The most important tools for America’s 35,000 private investigators are database subscription services. For more than a decade, professional snoops have been able to search troves of public and nonpublic records . . . and condense them into comprehensive reports costs as little as $10. Now they can combine that information with the kinds of things marketers know about you, such as which 67
politicians you donate to, what you spend on groceries, and whether its weird that you ate in last night, to create a portrait of your life and predict your behavior. IDI, a year-old company in the so-called data-fusion business, is the first to centralize and weaponized all that information for its customers.” According to its CEO, Derek Dubner, the company has “already built a profile on every American adult.” He says that the “personal profiles include all known addresses, phone numbers, and e-mail addresses; every piece of property ever bought or sold, plus related mortgages; past and present vehicles owned; criminal citations, from speeding tickets on up; voter registration; hunting permits; and names and phone numbers of neighbors. The report also includes photos of cars taken by private companies using automated license plate readers—billions of snapshots tagged with GPS coordinates and time stamps to help PIs surveil people or bust alibis.”
********You can learn more about IDI (Interactive Data Intelligence) at: http://ididata.com/. The expression ‘data fusion’ seems useful and is widely used in a variety of contexts. Its Wikipedia entry is suggestive: https://en.wikipedia.org/wiki/Data_fusion. One can only imagine what a really determined organization with extensive resources could pull together for one person. Private investigators in North Carolina are licensed. You can learn more at: http://www.ncdps.gov/About- DPS/Bobaards-Commissions/Private-Protective-Services-Board.
(6 August 2016): “Tariffs and wages: An inconvenient iota of truth” (http://www.economist.com/news/economics-brief/21703350-third-our-series-looks-stolper- samuelson-theorem-inconvenient-iota)
********This is the third of six briefs on economics. It explores the eponymous Stolper-Samuelson Theorem of international trade and relates it to current economic deliberations. The presentation is probably as easy as it gets, although not exactly easy. Among other things, it points to the relatively ease that goods have in moving from country to country and the relatively difficulty that labor has in doing the same thing. It was the movement of labor, of course, that was one of the issues behind the recent Brexit vote in the UK.
(6 August 2016): “Think You Bought Red Snapper? Don’t Be So Sure” (http://www.wsj.com/articles/think-you-bought-red-snapper-dont-be-so-sure-1470428804)
------Three years ago the environmental group Oceana studied whether those buying fish were getting what they paid for. “Scientists performed DNA tests on more than 1,200 samples from nearly 700 different stores and restaurants in 21 states. One out of three fish were mislabeled . . . and the numbers were even worse in big cities such as New York, Los Angeles and Boston. The poster child for the problem is red snapper, which many experts cite as the most faked species.” According to researcher Mark Stoeckle, of Rockefeller University, “When you buy [red snapper], you almost never get it.” Behind the broader issue is that “Seafood uniquely lends itself to fraud. The supply chain for it is opaque and convoluted, and most white-fleshed fish—which is to say, most fin fish—looks similar when filleted. For unethical suppliers, it is easy to substitute a lower-cost fish for a pricier one.” 68
********The article concludes with some suggestions on how to avoid fish fraud. The final suggestion might have come from one of the cows in the (old) Chick-fil-A ads: “it might be smart to order the chicken instead.”
(9 August 2016): “Maple Syrup Cartel Battles a Black Market Rebellion” (http://www.bloomberg.com/news/features/2016-08-10/maple-syrup-cartel-battles-a-black-market- rebellion)
------“After eight years of tightly limiting output to keep prices high, the Federation of Quebec Maple Syrup Producers next year will boost its quota by 12 percent for 13,500 sap farmers who operate in the Canadian province. The goal is twofold: Reclaim the 10 percent of market share lost to the U.S. over the last decade, and quell a rebellion by producers increasingly turning to black market sales for growth.” Output restrictions had frustrated some, leading them “to sell on the black market.” According to Simon Trepanier, executive director of the Federation, “If we allow producers to add more taps . . . , they will not be interested in selling on the black market . . . It will help to have a clean market, instead of a black market.” Farmer Jim Dempsey of Inverness, Quebec, indicated that “looser restrictions may not work as planned. He’s concerned that the additional syrup will end up in the group’s strategic reserve, unless the federation can find more markets to sell into or lowers its prices, which he believes they won’t do.”
********The concerns voiced by Jim Dempsey are real ones. The article caught my attention because the shifting of the output restriction moves the boundary between legal and black markets. In the short run, that boundary will undoubtedly reduce the size of the black market as more existing producers with their existing production participate in the legal market. In the long run, however, the incentives that led some to access the black market will return and the size of the black market will increase once more.
********Nicely connected to the last comment above is the expression “For every regulatory action, there is a reaction.” This is the first sentence of “A Payday-Loan Rival Gains Ground” [SR](http://www.wsj.com/articles/a-payday-loan-alternative-gains-ground-1470603307). The instance examined in the article notes: “The latest example: A government effort to crack down on payday loans has given new energy to installment loans.” Restrictions on the availability of payday loans will almost surely lead to more installment loans which, although they may also have high interest rates, have longer repayment lengths. All this is reminiscent of the ecological saying “You cannot do only one thing.” This is true of all adaptive systems, of which markets are a prime example.
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[The Invisible Forces Weekly: Economics with a Broader View] 278 (17 August 2016)
(11 August 2016): “Orangutan able to guess a taste without sampling it, just like us” (https://www.sciencedaily.com/releases/2016/08/160811101027.htm)
------“Without having tasted a specific new juice mix before, an orangutan in a Swedish zoo has enough sense to know whether it will taste nice or not based on how he recombined relevant memories from the past. Only humans were previously thought to have this ability of affective forecasting, in which prior experiences are used to conjure up mental pictures about totally ne situations, says Gabriela-Alina Sauciuc of Lund University in Sweden, in Springer’s journal Animal Cognition.”
********I wasn’t aware there was a journal devoted to cognition in non-human animals but I’m glad there is. In microeconomics agents play a central role—they make things happen by way of making decisions in line with their preferences. It has been easy to assume that only human beings have preferences but anyone who shares a life with a bird, cat, llama, or mule knows that they have preferences, too. What is different here is that some researchers have devoted time and effort to demonstrating these preferences. Here is the link to the original article, “Affective forecasting in an orangutan: predicting the hedonic outcome of novel juice mixes” (http://link.springer.com/article/10.1007/s10071-016-1015-0).
********The term ‘affective forecasting’ is a new one for me. It is “an ability that allows the prediction of the hedonic outcome of never-before experienced situations, by mentally recombining elements of prior experiences into possible scenarios, and pre-experiencing what these might feel like” (Abstract of the article at the link). The description of the methods of the studies indicates that preferences are constructed (forecasted) from preferences for simpler items and then combined in some way. All this has something to say about experience goods (https://en.wikipedia.org/wiki/Experience_good) and the experience economy (https://www.amazon.com/Experience-Economy-Updated-Joseph-Pine/dp/1422161978/). If non- human beings have preferences, do they trade, too? Something more to consider on the way to creating an economics that considers all sentient beings. Time to revisit Gordon Tullock’s The Economics of Non-Human Societies (https://www.amazon.com/Economics-Non-Human-Societies- Gordon-Tullock/dp/1882969189/)?
********Gordon Tullock passed away on election day (4 November 2014), a synchronistic event for someone who wrote so much about the political process, including voting. He is one of those people who made great contributions to economics even though he reportedly took only one economics course during his life. Many argue that he should have received the Nobel Prize in Economics in 1986, when his long-time collaborator James Buchanan was so recognized. There is less information about Tullock’s life and work than there should be, in my estimation. Two obituary notices provide a hint of his accomplishments. One is from The Washington Post (https://www.washingtonpost.com/news/volokh-conspiracy/wp/2014/11/05/gordon-tullock- 70
rip/?utm_term=.bdf005c5db57) and another is from Forbes (http://www.forbes.com/sites/fredsmith/2014/11/06/in-memoriam-gordon-tullock/#3056db7847ca).
******** For the record, I was alerted to the orangutan story by the daily Economist Espresso: http://link.economist.com/view/540fcaaf3b35d03b58af7e894e4xb.dux/c5b6b5c7.
(13 August 2016): “Fiscal multipliers: Where does the buck stop?” (http://www.economist.com/news/economics-brief/21704784-fiscal-stimulus-idea-championed-john- maynard-keynes-has-gone-and-out)
********This is the fourth of six briefs on economics. It deals with the notion of the multiplier, which stemmed from the 1931 writings of Richard Kahn and was given currency by John Maynard Keynes in The General Theory of Employment, Interest, and Money (1936). Kahn noted that “public spending would yield both the primary boost from the direct spending, but also ‘beneficial repercussions’. If road-building, for instance, took workers off the dole and led them to increase their own spending, . . . then there might be a sustained rise in total employment as a result.” As this article points out, the existence and size of multipliers continues to be a point of contention among economists to this day. This controversy is focused on macroeconomic (national) multipliers rather than regional multipliers. There is no argument that regional multipliers, say for the Asheville, North Carolina Metropolitan Statistical Area (https://en.wikipedia.org/wiki/Asheville_metropolitan_area), exist and can be substantial.
********Last week Bloomberg mentioned the first brief on economics, which dealt with “the lemons problem” (http://www.economist.com/news/economics-brief/21702428-george-akerlofs-1970-paper- market-lemons-foundation-stone-information) in “The Dirty Little Secret of Finance: Asymmetric Information” (https://www.bloomberg.com/view/articles/2016-08-11/the-dirty-little-secret-of-finance- asymmetric-information). It’s worth a look, as it notes: “The upshot of all this . . . is that asymmetric information, which is nothing more than a nuisance in most markets, is at the core of finance. It’s key to the way traders, including high-frequency traders, make their profits. And it’s probably at the root of why markets break down and crash.” All this circles back to the controversy about the existence and size of multipliers. I suspect that in the multipliers are larger in the presence of asymmetric information.
(13 August 2016): “Where We Spend Is Upending Traditional Retail” (http://www.wsj.com/articles/where-we-spending-is-unending-traditional-retail-1471041884)
------“U.S. retail sales barely budged in July according to data released Friday, capping a week of tepid earnings results from department stores and underlining a seismic shift in consumer spending. Americans are still splashing out, but they are splurging less on goods such as apparel and electronics and more on entertainment, travel and health care. . . . Retail now represents only a slice of household outlays, with consumption of services making up about two-thirds of all personal expenditures.” 71
********The article points to a dramatic shift in consumer purchases from goods to services, as well as pointing toward a continuing movement from concrete-and-mortar stores to online for the purchase of goods. I was especially intrigued by the graphic “Twenty Years of Spending” that accompanies the article. It took me awhile to figure it out but it shows how the ranking of various consumer categories have changed over time. The most dramatic change has been the climb of the percentage of spending on Nonstore (mostly interest) spending, shown in gray. Also noteworthy are the fluctuations for Gasoline stations and Home and garden. This is definitely worth a look.
(15 August 2016): “It’s Getting Harder and More Expensive to Make Cars in Mexico” [SR](http://www.wsj.com/articles/mexicos-auto-production-boom-is-driving-up-labor-costs- 1471201920)
------Labor costs at auto-manufacturing plants in Mexico are increasing. As a result, “Retention and retraining programs are becoming the norm as are bonuses for employees who agree to stay in place, especially those with valued skills. . . . The pressure isn’t yet so severe that it is undermining the rationale for moving production to Mexico. But it is an unexpected sticker shock—labor is one of the few costs manufacturers can control—and threatens both profitability and production quality.” Labor competition is “most pronounced in Mexico’s industrial strongholds—cities such as Juárez in the north of Mexico—and in the central, heartland states of Guanajuato, Aguascalientes and San Luis Potosi. In Guanajuato, manufacturers including Honda and Mazda Moto Corp are busing workers from as many as two hours away, labor recruiters.”
********The pressure on the internal labor markets of Mexico is much reminiscent of the pressure on the internal labor markets of China. In both cases, increased demand for labor services due to increased manufacturing output has resulted in increased wage rates. I suspect that one result of this in Mexico will be, as it has been in China, the relocation of some production facilities to (rural) areas where wage rates are lower. The article made me think of Boom, Bust, Exodus: The Rust Belt, the Maquilas, and a Tale of Two Cities (https://www.amazon.com/gp/product/0199765618/), by Chad Broughton.
********Even the most locally rooted businesses, for example, the Hershey Co. of Hershey, Pennsylvania, must be alive to the possibility of the migration of their signature businesses. An examination of that possibility appears in “Hershey, Pa., Is the Town That Chocolate Built” [SR](http://www.wsj.com/articles/hershey-pa-is-the-town-that-chocolate-built-1471301344). On June 30th Mondelez International Inc. offered “to buy Hershey for $23 billion. Hershey’s board rejected the bid.”
(15 August 2016): “Economic Slump Sends Big Ships to Scrap Heap” (http://www.wsj.com/articles/economic-slump-sends-big-ships-to-scrap-heap-1471192256)
------“Up until a year ago, the shipping industry was ordering ships in droves. This year, orders of new vessels have fallen to a record low and companies can’t get rid of ships fast enough.” This year 72
about “1,000 ships that have the combined capacity to haul 52 million metric tons of cargo . . . will be dragged onto beaches, cut into pieces and sold for scrap metal this year. That is second only to the record amount of capacity of 61 million so-called dead weight tons that were scrapped and recycled in 2012.” According to Basil Karatzas of New York-based Karatzas Marine Advisors Co., “Given the tremendous overcapacity, it will take much more recycling and at least two to three years of no growth in capacity to see some balance between supply and demand.” As a result of the increasing number of scrapped ships, the price of scrap steel has fallen significantly. Two years ago “India, Pakistan and Bangladesh were paying about $460 a ton of steel. Last year it was $300 and it is now roughly $250. . . . South Asian scrapyards recycle about three-quarters of all ships every year. The remainder goes to yards in China and Turkey.”
********Evidently the business that reduces ship to scrap is called “ship breaking.” The shipping industry seems like it should be very interesting to analyze. There are freight rates to consider, as well as the prices of new ships and scrap. Then there is the durability of ships, not to mention their vintage. With the seeming rise anti-trade sentiment in the U.S., there will be many people looking to understand these (adaptive) relationships more carefully.
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[The Invisible Forces Weekly: Economics with a Broader View] 279 (24 August 2016)
(16 August 2016): “As Coal Industry Sputters, Some Miners Are Moving On” (http://www.bloomberg.com/news/articles/2016-08-16/as-coal-industry-sputters-some-miners-are- moving-on)
------A new study by “the Federal Reserve Bank of Cleveland finds laid-off coal miners are beginning to bow to the inevitable and train for jobs in other industries. The study . . . says a program called Hiring Our Miners Everyday [HOME] . . . has had success in moving coal miners into new jobs, although not in big numbers yet. . . . ‘As of March 2016, the HOME program has enrolled more than 3,000 laid-off coal miners and their spouses. Of those enrolled, 1,449 have received support while training for new careers. More than 1,100 have obtained new employment, while 90 participated in internships through the HOME program.’” Employers have been enthusiastic about the retrained miners: “Ex-coal miners have a reputation for being safety-conscious and dependable.”
********The article goes to note that “Coal-mining employment in eastern Kentucky has fallen from 67,000 in 1950 to 7,000 in 2014.” The study notes, though, that “helping coal miners move on isn’t easy . . . because ‘the job of a coal miner is much more than just a job: It’s an identity.’” The link to the study is provided in the article. Click on Case Study 5 “Transitioning Workers from Coal to Other Careers: Hiring Our Miners Everyday.” The case study is 12 pages long.
********While we are on the topic of exit, it is noteworthy that the National Mining Association and the American Coalition for Clean Coal Electricity are losing members, including some of the largest energy utilities in the United States. You can learn more in the article “Coal Lobbying Groups Losing Members as Industry Tumbles (https://insideclimatenews.org/news/23082016/coal-lobbying-groups- losing-members-industry-tumbles).
(17 August 2016): “Walmart’s Out-of-Control Crime Problem Is Driving Police Crazy” (https://www.bloomberg.com/features/2016-walmart-crime/)
------“Police reports from dozens of stores suggest the number of petty crimes committed on Walmart properties nationwide this year will be in the hundreds of thousands. But people dashing out the door with merchandise is the least troubling part of Walmart’s crime problem. More than 200 violent crimes, including attempted kidnappings and multiple stabbings, shootings, and murders, have occurred at the nation’s 4,500 Walmarts this year, or about one a day, according to an analysis of media reports.” All this is happening “more than a year into a corporate campaign to bring down crime—a campaign Walmart says is succeeding. . . . [But police] chiefs and their officers on the ground says that’s just not so.” At a Walmart in Tulsa, Oklahoma, police sergeant Robert Rohloff “says there’s nothing funny about Walmart’s impact on public safety. He can’t believe . . . that a multibillion-dollar corporation isn’t doing more to stop crime. Instead, he says, it offloads the job to the police at taxpayers’ expense.” Rohloff notes: “I may have half my squad there for hours.” The current level of crime is “the direct, if unintended, result of corporate policy.” Cost-cutting stemming 74
back to 2000 removed greeters, “taking away a deterrent to theft at the porous entrances and exits” and “Self-checkout scanners replaced many cashiers.”
********As the article points out, the amount of crime is not inevitable. Store size, location, hours of operation, and the observable presence of security guards can and do make a difference, as the experience of Target shows. Crime at Walmart can be reduced, of course, but it will require the hiring of additional employees that may well reduce profitability. Consequently, the public safety officers in Tulsa and elsewhere provide those services instead.
********The article includes links to an 11-minute radio broadcast and a four-minute video with the reporter of the story.
(18 August 2016): “Big Alcohol Tries to Go on a Health Kick” (http://www.bloomberg.com/news/articles/2016-08-18/beverage-makers-go-after-the-athleisure-set)
------“Alcoholic beverage companies have steered clear of the health-and-fitness trend that’s overtaken virtually every consumer category from food to clothing. Now that’s changing as millennials, especially women, obsess over everything they ingest. Big alcohol players, including Diageo and MillerCoors, are trying to cater to the so-called athleisure-wearing customer. Their challenge: to give fitness-chic stat to a product more associated with binge drinking and addiction.” As a result, new products are being marketed. “MillerCoors is releasing two alcoholic drinks with healthy-sounding names.” Easy Tea, a “refined, brisk and less sweet iced tea” and Zumbida Mango, “the first of several fruit-flavored fermented drinks.” Diageo will “soon sell a Smirnoff Spiked Sparkling Seltzer line.” Even Boston Beer, the producer of Sam Adams, is getting in on the action.
********The world of beverages containing alcohol is in a state of flux. As the article notes, the characteristics of the beverages are changing, but so are the packages in which the products are contained. Witness the expanded use of cans for craft beer (http://www.citizen- times.com/story/news/local/2016/08/18/canned-craft-beer-conquering-asheville/88515008/) and the increased sale of wine in cans (http://www.usatoday.com/story/life/people/2016/08/19/canned-wine- trend/88868790/). Clearly the delivery systems for alcohol are changing. Perhaps they must. In addition to the desire for companies to expand sales, there is a lingering—some producers sense a growing—concern of losing sales. This is addressed directly in “With Moderate Drinking Under Fire, Alcohol Companies Go on Offensive” [SR](http://www.wsj.com/articles/with-moderate-drinking- under-fire-alcohol-companies-go-on-offensive-1471889160). At a spring brewers’ conference, the managing director of the American Beverage Institute, Sarah Longwell, told the attendees that “The industry . . . was in danger of losing its ‘health halo.’” as “policy officials around the world scrutinize their previous advice in the light of research pointing to possible cancer risks.” If there is the possibility of losing the health halo, perhaps an extra dose of something perceived to be health will restore it. 75
(20 August 2016): “Game theory: Prison breakthrough” (http://www.economist.com/news/economics- brief/21705308-fifth-our-series-seminal-economic-ideas-looks-nash-equilibrium-prison)
********This is the fifth of six briefs on economics. It focuses on game theory, in particular John Nash’s Nobel Prize-winning idea of Nash equilibrium. In its exposition the familiar two-by-two matrix of the Prisoner’s Dilemma is discussed. As the article shows, the game theory that was the original brain child of John von Neumann and Oskar Morgenstern had to undergo significant development in order to reach its current position in economics and other disciplines, including political science, management, even biology.
********John Nash will be known to many from the movie “A Beautiful Mind” and possibly Sylvia Nasar’s book of the same name (https://www.amazon.com/Beautiful-Mind-Sylvia- Nasar/dp/1451628420). You can learn more about Nash and his work at: http://www.nobelprize.org/nobel_prizes/economic-sciences/laureates/1994/nash-facts.html.
(22 August 2016): “Rent-to-Own Homes: A Win-Win for Landlords, a Risk for Struggling Tenants” (http://www.nytimes.com/2016/08/22/business/dealbook/rent-to-own-homes-a-win-win-for-landlords- a-risk-for-struggling-tenants.html)
------Vision Property Management is one of a growing number of companies that are blurring “the line between what it means to be a renter and a homeowner. These companies do not offer regular leases or mortgages—they offer ‘rent to own’ contracts on homes that require tenants to make all repairs, no matter how big or small.” According to Vision’s Alex Szkaradek, the firm is “bringing the dream of homeownership to Americans who lack good credit or are too poor to qualify for mortgages. . . . But these rent-to-own agreements reside in a gray area of the law. . . . interviews with housing lawyers and more than a dozen of Vision’s customers across the country, found that these deals are risky, lack consumer protections and may not be enforceable in some states.”
********As the article points out, it is not unusual for customers to make substantial property repairs only to end up with nothing. Concerns such as these have led seven U.S. Senators to write to the new Consumer Financial Protection Bureau regarding “the lack of protections for low-income home buyers. The article includes a three-minute video and a copy of the rent-to-own documents of a Vision customer. You can learn more about Vision at: https://vpm3.com/. It appears that VPM does not have houses in North Carolina, but it does in Georgia, Kentucky, South Carolina, Tennessee, and Virginia.
(23 August 2016): “The Nation’s First Soda Tax Is Working. Can Its Success Last?” (http://www.bloomberg.com/news/articles/2016-08-23/the-nation-s-first-soda-tax-is-working-can-its- success-last)
------According to a study just published in the American Journal of Public Health, “Minority and low-income residents of Berkeley, Calif., drank 21 percent less of the sugary stuff after the city implemented an excise tax . . . Researchers compared sugary drink sales in Berkeley from the four- 76
month period of April 2014 through July 2014 to a five-month period the next year, just after the tax went into effect. During that same period, soda sales in San Francisco and Oakland to minorities and low-income residents . . . ticked up 4 percent.” The tax, which was implemented in March 2015, “charges distributors an additional penny per ounce of sugar-sweetened beverages such as soda, sports drinks, and sweet teas.” It has been estimated that “Nearly 70 percent of that cost is then passed on to consumers.”
********This is a clear example of the impact of the invisible foot—legal and political forces—on consumption behavior. Evidently the imposition of an excise tax such as this tend to be accompanied by campaigns that “inform people of the dangers of soda.” The source article appears to be “Higher Retail Prices of Sugar-Sweetened Beverages 3 Months After Implementation of an Excise Tax in Berkeley, California.” You can learn more at: http://ajph.aphapublications.org/doi/abs/10.2105/AJPH.2015.302881.
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[The Invisible Forces Weekly: Economics with a Broader View] 280 (31 August 2016)
(22 August 2016): “Putting Garbage Out of Sight” (http://daily.jstor.org/putting-garbage-out-of-sight/)
------“For years, much of the recycling Americans set out at our curbs has ended up in less wealthy countries like China and India, but not these countries are putting more limits” on the industry. Indeed, the history of scrap sellers and recyclers is replete with recognition of the danger and undesirability of working in the industry, as well as the ease of entry into the business. Because it was “an easy business for immigrants with few other options to enter . . . scrap dealers were largely Jewish immigrants” by the early twentieth century. Intense competition among many small dealers merged with “anti-immigrant and anti-Semitic stereotypes” contributed to the general distrust of junk sellers among the public. This distrust led to increased regulation of scrap sellers and drove their businesses away from public view, indeed, across the world in recent years. “But the growing resistance from foreign governments may force us to pay more attention to this dirty work.”
********This concise summary draws upon all three invisible forces: competition among dealers (Invisible Hand), regulation (Invisible Foot), and prejudice (Invisible Handshake). For more detail, see the base article “Dirty Work: How Hygiene and Xenophobia Marginalized the American Waste Trades, 1870-1930,” by Carl Zimring. The full reference is provided at the link.
********As I thought about this, I wondered “How does Zimring’s work connect with environmental racism?” Having asked the question, I did a search and found that he had just published a book on the subject, Clean and White: A History of Environmental Racism in the United States. You can learn more about it at: https://www.amazon.com/Clean-White-History-Environmental- Racism/dp/1479826944/.
(25 August 2016): “The ginseng web” (http://www.bostonglobe.com/ideas/2016/08/25/the-ginseng- web/JTYJQLIo33SNCBhwhpqGJO/story.html)
------The discovery of ginseng in North America grew out of a 1711 letter from a Jesuit missionary in China who speculated, upon his knowledge of the climatic conditions in China, that “if ginseng were found growing wild in any other part of the world, it likely would be Canada.” The circulated widely in Jesuit circles and Joseph-François Lafitau, who was stationed near Quebec, searched and found ginseng “growing close by a mission lodge.” As a result of his discovery, “International trade would never be the same.” This story, related by Harvard historian Shigehisa Kuriyama, appears in the forthcoming book The Botany of Empire in the Long Eighteenth Century. “The book examines how the growing global traffic in plants—for medical, economic, and scientific purposes—shaped colonial expansion in the 1700s.”
********You can learn more about the book, and the Symposium upon which it is based, at: http://news.harvard.edu/gazette/story/2016/08/beauty-inside-and-out/. A related and well-known book is Ecological Imperialism: The Biological Expansion of Europe, 900-1900 78
(https://www.amazon.com/Ecological-Imperialism-Biological-Expansion- Environment/dp/0521546184/), by Alfred W. Crosby. It brings to mind, too, The Botany of Desire: A Plant’s-Eye View of the World (https://www.amazon.com/Botany-Desire-Plants-Eye-View- World/dp/0375760393/), by Michael Pollan.
(28 August 2016): “Feds use Rand formula to spot discrimination. The GOP calls is junk science” (http://www.latimes.com/business/la-fi-rand-elliott-20160824-snap-story.html)
------Marc Elliott, a statistician who works for the Rand Corporation, is the developer of an algorithm that is used to estimate “the probability that someone is white, black, Asian or Hispanic based only on their address and last name.” The algorithm employs Bayesian Improved Surname Geocoding (BISG) and has been used in a variety of contexts in which discrimination was expected. Most recently it was employed by the Consumer Financial Protection Bureau (CFPB) and resulted in an $80 million payment by Ally Financial due to its lending history. In fact, “The CFPB has used BISG “to accuse some of the country’s largest auto lenders, including the financing arms of Toyota and Honda, of discrimination.”
********You can learn more about the CFPB’s use of BISG in the 37-page pdf “Using publicly available information to proxy for unidentified race and ethnicity: A methodology and assessment” (http://files.consumerfinance.gov/f/201409_cfpb_report_proxy-methodology.pdf). The original 2009 research paper by Elliott, et al., is referenced in the pdf. As Elliott notes in the article, the algorithm is intended to be used for groups, not individuals. Thus the problem arises that discrimination might be found but the particular people discriminated against may be difficult to identify. That is evidently part of the reason why some legislators have called the BISG-based work of the CFPB “junk science.” This problem of identification was mentioned in “U.S. Government Uses Race Test for $80 Million in Payments” [SR](http://www.wsj.com/articles/u-s-uses-race-test-to-decide-who-to-pay-in-ally-auto- loan-pact-1446111002). Giving the present, and likely future, interest in all types of discrimination, we can expect to see broader use of the Elliott algorithm.
********Although only indirectly related, this is a good opportunity to mention Weapons of Math Destruction: How Big Data Increases Inequality and Threatens Democracy, a review of which can be read at: http://www.bloomberg.com/news/articles/2016-08-24/a-math-nerd-wants-to-stop-the-big-data- monster. Its author, Cathy O’Neil, has a Ph.D. in mathematics from Harvard but left academia for the, supposedly, much more lucrative career in the financial industry. Her timing was less than perfect and WMD chronicles her “odyssey from math-loving nerd clutching a Rubik’s Cube to Occupy Wall Streeter pushing for banking reform; along the way, she learns how algorithms—models used by governments, schools, and companies to find patterns in data—can produce nasty, or at least unintended, consequences.” The book will be released in hardcover on September 6th. 79
(29 August 2016): “Odd Lots: How Watching Seinfeld Can Teach You About Economics” (http://www.bloomberg.com/news/articles/2016-08-29/odd-lots-how-watching-seinfeld-can-teach-you- about-economics)
********This edition of Odd Lots by Bloomberg editors Joe Weisenthal and Tracy Alloway provides a 22-minute interview with economist Alan Grant, who is responsible for website “The Economics of Seinfeld” (http://yadayadayadaecon.com/). Grant has gone through all nine seasons of “Seinfeld” and pulled out video clips illustrating a wide array of economic concepts. As the website notes, “It is the simplicity of Seinfeld that makes it so appropriate for use in economics courses.” I confess that I was not a follower of Seinfeld but I viewed a few of the roughly 100 clips on the website and found them entertaining and appropriate illustrations of economic concepts. In addition, they provide students with a sense of the broader issues often assumed away in the relatively spare models that economists typically teach. In addition to “Seinfeld,” Grant mentions “The Wire” as a good example of a TV series that lends itself to economics instruction, e.g., the price elasticity of demand.
********In the spirit of economics in TV shows, this week’s copy of The Economist has a bit more to say, at least indirectly. In “Schumpeter: Mafia management” (http://www.economist.com/news/business/21705858-crime-families-naples-are-remarkably-good- business-mafia-management) has a bit to say about the Italian show “Gomorrah” that just began showing on Sundance TV. The series is “a drama of Italian gangs known as the Camorra that runs a criminal empire from their base in Naples.” Evidently the program is “far darker” than the much- watched series “The Sopranos,” “The Wire,” and “Breaking Bad.” Still, the program “has been Italy’s most talked-about-television series since its release two years ago.” I thought the article made an excellent point when it indicated that where it is difficult to do legal business, illegal business will thrive. This seems like a testable hypothesis. The article mentions the World Bank’s ease-of-doing- business table (http://www.doingbusiness.org/rankings), which would seem to be an important element in such a national study. Of course, the invisible foot varies greatly from country to country. Consequently, it might be easier to test the relationship between business ease and illegal activity using states (in the U.S.) or comparable geographical units for other countries. Is there a credible ranking for each state of the U.S. on the ease-of-doing business?
********What role does trust play in doing legal and illegal business? That is hard to say, but clearly trust is one of those “lubricants” that make transactions take place more easily. The issue of trust is dealt with this week in The Economist in “Free exchange: Believing is seeing” (http://www.economist.com/news/finance-and-economics/21705831-new-technologies-will-make- society-richer-cultivating-trust-believing-seeing). For additional information, in which the article is embedded, take a look at the Free Exchange blog: http://www.economist.com/blogs/freeexchange/2016/08/bot-we-trust.
********By the way, economist Kenneth S. Rogoff thinks that one of the factors supporting illegal activity is the $100 bill and that it is time to get rid of it, then the $50 and $20 bills. As he writes in 80
“The Sinister Side of Cash” [SR](http://www.wsj.com/articles/the-sinister-side-of-cash-1472137692), “There is little debate among law-enforcement agencies that paper currency, especially larger notes such as the U.S. $100 bill, facilitates crime: racketeering, extortion, money laundering, drug and human trafficking, the corruption of public officials, not to mention terrorism. There are substitutes for cash—cryptocurrencies, uncut diamonds, gold coins, prepaid cards—but for many kinds of criminal transactions, cash is still king. It delivers absolute anonymity, portability, liquidity and near-universal acceptance.” You can learn more about his book The Curse of Cash at: https://www.amazon.com/Curse-Cash-Kenneth-S-Rogoff/dp/0691172137/. Rogoff is on the faculty of Harvard University and was formerly the chief economist at the International Monetary Fund.
(29 August 2016): “Which State Is a Big Renewable Energy Pioneer? Texas” [SR](http://www.wsj.com/articles/which-state-is-a-big-renewable-energy-pioneer-texas-1472414098)
------Traditionally strong in oil and gas, Texas is adding renewables to its energy portfolio. The state “has added more wind-based generating capacity than any other state, with wind turbines accounting for 16% of electrical generating capacity as of April. Now Texas is anticipating a huge surge in solar power. At a time when debate is raging between political parties over climate change, and critics charge that ‘green energy’ is little more than a government creation, Texas has taken an approach that works within the state’s free-market-based electricity system.” The present situation dates back “to 1999, when then-Gov. George W. Bush and a Republican-dominated legislature overhauled the Texas power market. The free market-oriented deregulation broke the grip of most monopoly utilities that controlled generation, transmission and retail sales of electricity and introduced competitive auctions for wholesale power.”
********Texas is well-suited for electricity generated by both wind and solar. No doubt the use of these resources was hastened by deregulation, although it surely also enabled the Enron scandal (https://en.wikipedia.org/wiki/Enron_scandal), which was “revealed in October 2001.” Andrew Fastow was involved in the Enron debacle and he figures prominently in a forthcoming book by Eugene Soltes, Why They Do It: Inside the Mind of the White-Collar Criminal. You can learn more about the book and “why they do it” at: http://www.bloomberg.com/news/articles/2016-08-29/why- they-did-it-madoff-and-enron-s-fastow-explain-the-biggest-frauds-in-u-s-history.
********The electricity market is, of course, undergoing massive transformation, with more on the way. The further development of electrical storage by batteries is part of that transformation, and it is explored in “Energy storage is taking on a greater role in the power grid. But how big can it get?” (http://www.latimes.com/business/la-fi-energy-storage-future-20160829-snap-story.html). Better batteries will, among other things, enable electric cars to assume a larger share of the auto market. This is developed at some length in the column by Christopher Mims, “Why Electric Cars Will Be Here Sooner Than You Think” (http://www.latimes.com/business/la-fi-energy-storage-future- 20160829-snap-story.html). I thought Mims made a valuable point when he said that mass adoption of “electric vehicles is coming, and much sooner than most people realize. In part, this is because electric 81
cars are gadgets, and technological change in gadgets is rapid.” This article seems to have struck a nerve, at least it got people writing, as it had more than 900 comments on the first day of its publication.
(29 August 2016): “FAA Forecast: 600,000 Commercial Drones Within the Year” (http://www.nytimes.com/aponline/2016/08/29/us/politics/ap-us-drone-rules.html)
------According to an estimate of the Federal Aviation Administration, there “will be 600,000 commercial drone aircraft operating in the U.S. within the year as the result of new safety rules that opened the skies to them on Monday.” In addition to a variety of rules for operating the unmanned aircraft, “Drone operators must also pass a test of their aeronautical knowledge administered by the FAA.” More than 3,000 people “had registered with the FAA to take the test as of Monday.”
********The University of North Dakota offers a B.S. in Aeronautics with a Major in Unmanned Aircraft Systems Operations (http://aviation.und.edu/prospective-students/undergraduate/uas- operations.aspx). Presumably the FAA’s new rule will further increase the demand for the degree. You can learn more about the new drone rules at: https://www.faa.gov/news/updates/?newsId=86305.
(31 August 2016): “Employers Find ‘Soft Skills’ Like Critical Thinking in Short Supply” (http://www.wsj.com/articles/employers-find-soft-skills-like-critical-thinking-in-short-supply- 1472549400)
------“The job market’s most sought-after skills can be tough to spot on a résumé. Companies across the U.S. say it is becoming increasingly difficult to find applicants who can communicate clearly, take initiative, problem-solve and get along with co-workers. Those traits, often called soft skills, can make the difference between a standout employee and one who just gets by.” These skills are especially important now that “Companies have automated or outsourced many routine tasks, and the jobs that remain often require workers to take on broader responsibilities that demand critical thinking, empathy or other abilities that computers can’t easily simulate.”
********I was especially struck by this paragraph in the article:
In a Wall Street Journal survey of nearly 900 executives last year, 92% said soft skills are equally important or more important than technical skills. But 89% said they have a very or somewhat difficult time finding people with the requisite attributes. Many say it’s a problem spanning age groups and experience levels.
How, then, can these “soft skills” be spotted on the résumé? I doubt that there is an easy answer. More than likely, these become evident only through face-to-face interaction over time, rather than through some sort of document, e.g., a test or curriculum vitae. Perhaps that is why personal interviews play such an important role in hiring processes. I can’t help but think that the distinction between tacit and explicit knowledge is relevant to the discussion. A thorough, though challenging, 82
discussion of the discussion is presented in Tacit and Explicit Knowledge (https://www.amazon.com/Tacit-Explicit-Knowledge-Harry-Collins/dp/022600421X/), by sociologist Harry Collins.
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[The Invisible Forces Weekly: Economics with a Broader View] 281 (7 September 2016)
(27 August 2016): “The Mundell-Fleming trilemma: Two out of three ain’t bad” (http://www.economist.com/news/economics-brief/21705672-fixed-exchange-rate-monetary- autonomy-and-free-flow-capital-are-incompatible)
********This is the sixth of six briefs on economics. (Somehow I failed to include it last week.) It focuses on the Mundell-Fleming trilemma, also known as the “impossible or inconsistent trinity” that says “a country must choose between capital mobility, exchange-rate management and monetary autonomy . . . Only two of the three are possible.” This brief is a little longer than the previous ones, perhaps because of its importance and the explanation devoted to making the trilemma plausible. Toward the end of the article the work of French economist Hélène Rey is discussed, the most notable statement being “What is clear from Ms Rey’s work is that the power of global capital flows means the autonomy of a country with a floating currency is far more limited than the trilemma implies.” Policy makers and politicians please take note.
********All six briefs of economics, along with a wealth of related material, can be accessed at: http://www.economist.com/economics-briefs. For example, there are two earlier articles dealing with the Mundell-Fleming trilemma and its consequences for economic policy.
(1 September 2016): “Where American Public Schools Came From” (http://daily.jstor.org/where- american-public-schools-came-from/)
------“As kids return to school this fall, consider the remarkable fact that we all contribute to the education of our neighbors’ kids. While taxpayer-funded college and healthcare are controversial, you rarely hear the argument taxes shouldn’t pay for elementary and high schools.” In “The Local Property Tax for Public Schools: Some Historical Perspectives,” Billy D. Walker explores how this happened. The story begins “long before the American Revolution. Universal, compulsory, free education for children was a Reformation idea, partly a result of Protestants’ desire to let people read scripture for themselves, and partly an effort to wrest control of educational systems from the Catholic schools. In the 1500s, German states began funding public schools.” Puritans led the way in England “but the 1660 restoration of the monarchy set the project back for more than a century. Meanwhile, Puritans were bringing their ideas to North America. In 1647, Massachusetts Bay Colony passed a law saying that the state could require towns to establish schools under control of public officials, make children attend them, and levy taxes to support them.”
********The link to a pdf of the Walker article is included at the bottom of the post. The role of religion (the invisible handshake) in the development of the law (the invisible foot) enabling the public financing of education (the invisible hand) is striking. The historical background provides a new perspective on current discussions of public education, especially as it relates to vouchers. 84
(2 September 2016): “This small Indiana county sends more people to prison than San Francisco and Durham, N.C., combined. Why?” (http://www.nytimes.com/2016/09/02/upshot/new-geography-of- prisons.html)
********As stated by Wikipedia, in 2013 “there were . . . 3,143 counties and county-equivalents in the United States.” Each county, subject to state law, has its own judicial and law enforcement system, with the ability to be elected and re-elected playing an important role in the rigor of enforcement. As a result, as the article points out, there are dramatic “disparities” in the “admission rates” to correctional facilities and sentence length among the various counties. The article dramatically shows that the location of a conviction matters greatly, e.g., “rural, mostly white and politically conservative counties” tend to have higher rates of “admission” and longer sentences. Leading the way in the U.S. is Dearborn County, Indiana; in North Carolina, Martin County, in the north-east part of the state, leads the way.
********The article has two graphics that are especially enlightening. One is of the U.S. as a whole, at least the lower 48, from which you can find information on “admission rates” and rates of increase between 2006 and 2013 by an appropriate click for any county. The other, “A Growing Divide,” shows that inmates per thousand have fallen dramatically in Populous counties, fallen substantially in Midsized counties, and risen slightly in Small counties. Visually impressive, to be sure.
********The words ‘disparity’, as used above, and ‘difference’ carry important shades of meaning that are developed at: http://content.healthaffairs.org/content/27/2/374.full. As I understand it, a disparity is a difference that is unjust. That suggests that some differences are not unjust, i.e., just. Of course, some people who use the term ‘disparity’ may not make such a distinction. I intend to be careful in my usage.
(3 September 2016): “A Lobbyist Wrote the Bill. Will the Tobacco Industry Win Its E-Cigarette Fight?” (http://www.nytimes.com/2016/09/03/us/politics/e-cigarettes-vaping-cigars-fda-altria.html)
------“The e-cigarette and cigar industries have enlisted high-profile lobbyists and influential congressional allies in an attempt to stop the Food and Drug Administration from retroactively examining their products for public health risks or banning them from the market. . . . The bipartisan effort has featured a former senator who did not register as a lobbyist before going to work for the cigar companies and a former Obama administration official, now a private consultant, who is trying to undo his earlier work reviewing the rule. In addition, one member of Congress introduced industry- written legislation without changing a word of it.”
********Unsurprisingly, companies are not interested in legislation that will decrease the demand for their products. The article is especially interesting, though, for the documents it provides showing how some legislation gets developed and the lobbying efforts that support it. A related article “Big Tobacco Wants to Turn Japan’s Smokers Into Vapers” (http://www.bloomberg.com/news/articles/2016-08-28/no-smoke-nicotine-hits-heat-up-japan-s- 85
moribund-tobacco-market) shows the international dimension of legislative efforts. In light of this, I’d like to call attention to The Cigarette Century: The Rise, Fall, and Deadly Persistence of the Product that Defined America (https://www.amazon.com/Cigarette-Century-Persistence-Product- Defined/dp/0465070485/), by Allan M. Brandt. This book is near the top of my reading list as I seek to learn more about the legal and illegal sale of addictive drugs and the products that serve as their delivery vehicles.
(5 September 2016): “No Sailors Needed: Robot Sailboats Scour the Oceans for Data” (http://www.nytimes.com/2016/09/05/technology/no-sailors-needed-robot-sailboats-scour-the-oceans- for-data.html)
------Saildrone, of Alameda, California, manufactures and rents autonomous robotic sailboats that are used for a variety of scientific purposes. In a recent application it was counting haddock in the Bering Sea, tracing “lawn-mower style paths across” its violent surface. The company charges a daily fee of $2,500 for the data it produces. Saildrone got its start with funds from Google executive chairman Eric Schmidt and his wife Wendy Schmidt, as well as three socially-minded venture capital firms. Although Saildrone makes the boats, their scientific instrumentation tends to come from those who rent them. As Christian Meining, the director of engineering of the National Oceanic and Atmospheric Administration’s Pacific Marine Environmental Laboratory notes, “Richard [Jenkins, Saildrone’s CEO,] had a great boat but no scientific sensors on it, and we had sensors but no boat.” Saildrone boats are now being used to help study “the El Nino arm-water pattern in the Pacific Ocean.” Ultimately, Jenkins contends, “a fleet of robot sensors spread across an ocean like the Pacific will make a huge difference in both weather and climate predictions.”
********You can learn more about Saildrone at its very informative website: http://saildrone.com/. Given that the oceans currently cover about 71 percent of the surface of Earth (http://www.oceanicinstitute.org/aboutoceans/aquafacts.html) and that the percentage will almost certainly increase with climate change, it appears like the company has a bright future. An interesting and important related article is “Flooding of Coast, Caused by Global Warming, Has Already Begun” (http://www.nytimes.com/2016/09/04/science/flooding-of-coast-caused-by-global-warming-has- already-begun.html). The idea of “sunny-day flooding,” i.e., flooding that takes place that is not the result of a hurricane, tropical storm, or some other weather event is one to remember. Contained within it is a link to an interactive graphic (http://www.nytimes.com/interactive/2016/09/04/science/global-warming-increases-nuisance- flooding.html) that examines sunny-day flooding up and down the East Coast, including Wilmington, North Carolina and Charleston, South Carolina. As the graphic says, Wilmington “and points nearby have been among the worst-hit parts of the country by the increase in tidal nuisance flooding.”
********One thing that struck me about the “No Sailors” article was a comment by the venture capitalist Chamath Palihapitiya, who said: “My interest in Saildrone is very practical . . . Let’s stop arguing about what is happening, and let’s measure. Once you have data and it’s statistically 86
significant and valid, then we can get to the next step, which is to find what the structural reforms are that need to happen.” This contrasts greatly with the willful ignorance of some political bodies that forbid the use of governmental funds for such matters as climate science or gun-based homicides. In relation to this, I was taken by two in a review of The Dream of Enlightenment (http://www.economist.com/news/books-and-arts/21706235-well-documented-account-second-golden- age-western-philosophy-seeing-light): Sapere aude (dare to know). Immanuel Kant used them in his 1784 essay “An Answer to the Question: What is Enlightenment?” You can learn more about the history of the expression at: https://en.wikipedia.org/wiki/Sapere_aude. One translation of the essay can be found at: https://en.wikisource.org/wiki/What_is_Enlightenment%3F.
(6 September 2016): “A Labor Day Look at the Future of Work” (http://daily.jstor.org/a-labor-day- look-at-the-future-of-work/)
------“Labor Day is often the moment when we look back at the history of the trade union movement . . . But it is also a moment to look forward, and the consider the forms of worker advocacy and social support we will need in the years ahead. At this moment, that means thinking very carefully about the relationship between income inequality, computerization, and unionization. The three are closely related, as Tali Kristal argues” in a recent article. According to hear research, “It’s not computerization that drives down workers’ share of national income, relative to the share that is earned by . . . company owners and investors . . . Rather, it’s the way that computerization affects unionization rates: by weakening unions, technology has changed the balance of power between labor and capital, and allowed the owner/investor class to claim a larger share of income.”
********In addition to the work of Tali Kristal cited in the article, articles by well-known and respected economist historian of technology Joel Mokyr (and others) and Sara Horowitz are discussed and linked. I’m not aware of people who have looked carefully at the relationship between unionization, computerization, and inequality, so Kristal’s work sounds like it could be worth a closer look. It was a good idea to couple Kristal’s work with the longer perspective of Mokyr, et al. A related story, see “In the Land of the Robot [Japan], Androids Are on the March” (http://www.nytimes.com/2016/09/07/world/what-in-the-world/in-the-land-of-the-robot-androids-are- on-the-march.html). It contains a 30-second video of the robot “Chihira Junco, a tourist greeter at a shopping mall in Tokyo.” The producer of Ms. Junco plans “to develop 1,000 more androids in 2017. By 2020, it hopes to make 10,000 a year.” Luddites (https://en.wikipedia.org/wiki/Luddite) take note.
********While we are taking a look at how computerization has been disrupting the labor market, it is worthwhile drawing attention to a book that examines how digitization has disrupted the entertainment industry: Streaming, Sharing, Stealing: Big Data and the Future of Entertainment (https://www.amazon.com/Streaming-Sharing-Stealing-Future-Entertainment/dp/0262034794/), by Michael D. Smith and Rahul Telang. According to Hal Varian, the Chief Economist of Google, “Smith and Telang have long been recognized as leading experts on the economics of the entertainment industry. . . . Anyone who wants to understand the uneasy relationship between tech and 87
entertainment should read this book.” The book is usefully reviewed at: http://www.wsj.com/articles/were-all-cord-cutters-now-1473203919.
(7 September 2016): “The New Face of American Immigration” (http://graphics.wsj.com/immigration-from-mexico-china-and-india/)
********This is a striking interactive graphic showing migration patterns in the U.S. from 2005 through 2014. It took me awhile to learn how the interactive features worked, but it was worth the effort. The things I noticed were (1) the absolute and relative decrease in immigrants from Mexico; (2) the absolute and relative increase in immigrants from China and India; and (3) the predominance in every year of the Other category, i.e., most immigrants come from countries other than China, India, and Mexico. The source of the map appears to be the Integrated Public Use Microdata Series (https://usa.ipums.org/usa/) of the Minnesota Population Center of the University of Minnesota. While exploring the site I ran across a link to an article in The New York Times that provides vivid time series of “Where people born in . . . [name of state or D.C.] have moved to” for every state from 1900 through 2012 (http://www.nytimes.com/interactive/2014/08/13/upshot/where-people-in-each-state- were-born.html). For example, in 2012, 75% of the people born in North Carolina lived in the state, while 3% of the people born in North Carolina lived in Virginia. North Dakota is more dramatic. In 2012, 47% of the people born there lived there, while 13% of the people born there lived in Minnesota. One could learn a lot by reflecting on these maps, especially the one for the District of Columbia.
********This is probably the place to draw attention to “Schumpeter: Leaving for the city” (http://www.economist.com/news/business/21706285-lots-prominent-american-companies-are- moving-downtown-leaving-city), which discusses the return of many business headquarters from the suburbs, and in doing so draws attention to The Big Sort: Why the Clustering of Like-Minded America is Tearing Us Apart (https://www.amazon.com/Big-Sort-Clustering-Like-Minded- America/dp/0547237723/), by Bill Bishop. I wonder what the regional and urban maps would show if developed on a pattern for those on the state level?
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[The Invisible Forces Weekly: Economics with a Broader View] 282 (14 September 2016)
(8 September 2016): “Killing Off American Cows to Keep Milk Prices High” (http://www.bloomberg.com/news/articles/2016-09-08/cow-killing-and-price-fixing-in-your- supermarket-dairy-aisle)
------“Although American demand for dairy has risen steadily for almost 40 years, some farmers tried to limit the supply of milk by killing off their own cows. . . . This mysterious state of affairs was revealed in a nationwide class-action lawsuit against dairy cooperatives, groups of farmers who pool their supplies but, as a whole, serve as middlemen between the farmers and dairy processors. In this case, lawyers from one of the premier U.S. plaintiffs’ firms alleged on behalf of American consumers that the cooperatives paid farmers to prematurely turn hundreds of thousands of cows into burgers in a sprawling scheme to prop up dairy prices.” This week the defendants settled for $52 million. The antitrust case “pulls the curtain back on a highly complex sector of the U.S. agricultural economy.” The initiative that led to the premature deaths of many dairy cows, known as the “herd retirement program,” was spearheaded by “Cooperatives Working Together, run by the lobbying group National Milk Producers Federation, and supported by farms producing almost 70 percent of America’s milk.”
********Of course, it is easy to understand that an individual dairy farmer, when confronted by low prices for milk, may wish to sell his cows. What was at issue in this case, however, was that “cooperatives paid above-market prices for dairy cows owned by member farmers, and sent them to be slaughtered before they would have otherwise.” It was this collective action managed through the cooperatives that ran afoul of the 1922 Capper-Volstead Act. You can learn more about the Act at: https://en.wikipedia.org/wiki/Capper%E2%80%93Volstead_Act.
(8 September 2016): “Private Prisons Have a Problem: Not Enough Inmates” (http://www.bloomberg.com/news/articles/2016-09-08/private-prisons-have-a-problem-not-enough- inmates)
------“With overall violent crime rates falling nationally and fewer people getting sentenced to long stretches behind bars, private prison companies see a potentially catastrophic decline in demand for their services. Their response: diversify into everything from halfway houses to neighborhood check- in centers for drug offenders.” The primary reason for the decline is the curtailment of “harsh mandatory-minimum sentences and other changes in criminal justice policies have combined to reduce federal and state inmate head counts.” Although recent announcements by the federal government indicate a move away from private prisons [(https://www.washingtonpost.com/news/post- nation/wp/2016/08/18/justice-department-says-it-will-end-use-of-private-prisons/)], the same is not true at the state level. As a result, “state-issued private prison contracts appear to be more secure because state penal systems remain more crowded than their federal counterparts.”
********The stock prices of Corrections Corp. of America and Geo Group, both large providers of prison services, “have each sunk by more than 30 percent . . . Thus the drive for diversification.” How 89
would public prisons and prison systems respond to such a decline? It is useful to note that it is the legal system is a central factor in creating the demand for prison services. Just as legislation can decrease the demand for services, so can in create it. An illustration of this point is provided by “Inmate Populations Rise Again in Some States” [SR](http://www.wsj.com/articles/inmate- populations-rise-again-in-some-states-1473725090). Contributing to these localized increases is an “epidemic of opiate addiction and a handful of high-profile crimes.” Arkansas, in particular is an example of a state that “in 2011 passed a landmark law to reduce harsh drug sentences, as a way to curb costs from overcrowded prisons.” The result was a 10% drop in prison population over two years. But a 2013 carjacking and shooting by a parolee led state officials to tighten parole policies. Now “Arkansas’s prisons are more crowded than they were before the 2011 legislation.”
********On a related topic, inmates across the country recently protested their pay and living conditions at the time of the 45th anniversary of Attica. More detail is provided in “Prisoners Stage Coordinated Strikes in Several States” (http://www.wsj.com/articles/prisoners-stage-coordinated- strikes-in-several-states-1473895389). According to the article, the pay level at one prison ranges from “74 cents a day to $3.34 a day.”
(9 September 2016): “Chinese Billionaire Linked to Giant Aluminum Stockpile in Mexican Desert” (http://www.wsj.com/articles/chinese-billionaire-linked-to-giant-aluminum-stockpile-in-mexican- desert-1473356054)
------“Two years ago, a California aluminum executive commissioned a pilot to fly over the Mexican ton of San José Iturbide . . . and snap aerial photos of a remote desert factory. He made a startling discovery. Nearly one million metric tons of aluminum sat neatly stacked behind a fortress of barbed- wire fences. The stockpile, worth some $2 billion and representing roughly 6% of the world’s total inventory . . . quickly became an obsession for the U.S. aluminum industry. Now it is a new source of tension in U.S.-Chinese trade relations. U.S. executives contend that the mysterious cache was part of a brazen scheme by one of China’s richest men to game the global trade system.” It is argued that billionaire Liu Zhongtian “tried to evade U.S. tariffs by routing aluminum through Mexico to disguise its origins, a tactic known as transshipping.” Subsequently, as series of developments has resulted in the reduction of the size of the “giant pile of aluminum . . . plans are afoot to ship the metal stash to a Vietnam site owned by Global Vietnam Aluminum Co.”
********Wikipedia has a brief article about transshipment (https://en.wikipedia.org/wiki/Transshipment), noting that it “is normally fully legal and an everyday part of world trade. However, it can also be a method used to disguise intent, as is the case with illegal logging, smuggling, or grey-market goods.” This is another article where consistency among statements on the same thing is hard to find. For that reason, it might be beneficial to take a look at “The post-truth world: Yes, I’d lie to you” (http://www.economist.com/news/briefing/21706498- dishonesty-politics-nothing-new-manner-which-some-politicians-now-lie-and). 90
(13 September 2016): “How the Sugar Industry Shifted Blame to Fat” (http://www.nytimes.com/2016/09/13/well/eat/how-the-sugar-industry-shifted-blame-to-fat.html)
------“The sugar industry paid scientists in the 1960s to play down the link between sugar and heart disease and promote saturated fat as the culprit instead, newly released historical documents show. The internal sugar industry documents, recently discovered by a researcher at the University of California, San Francisco, and published Monday in JAMA Internal Medicine, suggest that five decades of research into the role of nutrition and heart disease, including many of today’s dietary recommendations, may have been largely shaped by the sugar industry. . . . The documents show that a trade group called the Sugar Research Foundation, known today as the Sugar Association, paid three Harvard scientists the equivalent of about $50,000 in today’s dollars to publish a 1967 review of research on sugar, fat and heart disease. The studies used in the review were handpicked by the sugar group; and the article, which was published in the prestigious New England Journal of Medicine, minimized the link between sugar and heart health and cast aspersions on the role of saturated fat.”
********There is no surprise that an organization would “go shopping” for people and arguments that support its interests. All this is effectively illustrated in Merchants of Doubt and is the lifeblood for lobbyists and the organizations that employ them. What is surprising, though, is three Harvard researchers were caught up in the effort. Although many journals now require disclosure of funding sources, it is easy to see why Dr. Walter Willett, the chair of the nutrition department of the Harvard T.H. Chan School of Public Health, says that the situation serves as a reminder of “why research should be supported by public funding rather than depending on industry funding.” This comes, though, at a time when public support of universities is declining.
********A valuable complementary piece form “The Opinion Pages” is “The Shady History of Big Sugar” (http://www.nytimes.com/2016/09/17/opinion/the-shady-history-of-big-sugar.html). It provides a look at how the industry has, over 150 years, “shaped government policy in order to fuel our sugar addiction. Today’s sugar industry is a product of the 1th century, when the key federal sugar policy was not a dietary guideline but a tariff on sugar imports.” The Opinion is by David Singerman, an historian of science. He wrote with such authority and ease that I gathered he had written about the subject previously. Indeed, his doctoral dissertation is “Inventing purity in the Atlantic sugar world, 1860-1930” (https://dspace.mit.edu/handle/1721.1/93812). A recent book on by April Merleaux, Sugar and Civilization: American Empire and Cultural Politics of Sweetness (https://www.amazon.com/Sugar-Civilization-American-Cultural-Sweetness/dp/1469622513/), seems to provide a nice complement. The desire for “sweetness” is imaginatively examined by Michael Pollan in the first chapter of his book The Botany of Desire (https://www.amazon.com/Botany-Desire- Plants-Eye-View-World/dp/0375760393/). There the apple is the source of sweetness, at least for those non-Native Americans who settled what is now the United States.
********An article that is related to the one on the sugar industry is “Can ExxonMobil Be Found Liable for Misleading the Public on Climate Change?” 91
(http://www.bloomberg.com/news/articles/2016-09-07/will-exxonmobil-have-to-pay-for-misleading- the-public-on-climate-change). The relationship I have in mind is the concealment of information that is contrary to the interests of an organization, as well as the intentional promotion of information that is contrary to the information being concealed. I guess this tends to fall under the categories of secrecy and lying. As it turns out, Sissela Bok has written effectively and interestingly on both topics. With regard to the former, there is Secrets: On the Ethics of Concealment and Revelation (https://www.amazon.com/Secrets-Concealment-Revelation-Sissela-Bok/dp/0679724737/), with regard to the latter, there is Lying: Moral Choice in Public and Private Life (https://www.amazon.com/Secrets-Concealment-Revelation-Sissela-Bok/dp/0679724737/). In the ExxonMobil article, the Racketeer influenced and Corrupt Organizations Act (RICO Act), plays an important role. If you read the first paragraph of the Wikipedia article on it (https://en.wikipedia.org/wiki/Racketeer_Influenced_and_Corrupt_Organizations_Act), you will be able to get a sense of its importance for the sugar article and the ExxonMobil article. The RICO Act played an important role in the earlier prosecution of cigarette companies.
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[The Invisible Forces Weekly: Economics with a Broader View] 283 (21 September 2016)
(10 September 2016): “Free exchange: All in the family” (http://www.economist.com/news/finance- and-economics/21706504-america-does-little-help-peoples-work-life-balance-enter-heather-boushey- all)
********This article takes a look at the work of Heather Boushey, an economist on the transition team of Hillary Clinton, which puts her “in line for a top job in a Clinton administration.” Boushey has made “inequities in the labour market the focus of her research. . . . In ‘Finding Time: The Economics of Work-Life Conflict’ . . . Ms Boushey argues that America’s labour-market troubles are largely the result of its failure to grapple with changes in family structures.” This is something to consider because “American is an extraordinary outlier in the quality of its safety net for families. It does not require firms to provide any paid family leave (when, for example, a child is born). The average in the OECD, a club of mostly rich countries, is 54 weeks.” You can learn more about Finding Time and some of her other work at: https://www.amazon.com/Finding-Time-Economics-Work-Life- Conflict/dp/0674660161/. There is also a Q&A with a reporter from The Wall Street Journal at: http://blogs.wsj.com/economics/2016/03/14/qa-heather-boushey-on-why-work-life-policies-arent-just- something-for-the-ladies/.
(15 September 2016): “Winemakers Toil to Beat the Heat of Climate Change” [SR](http://www.wsj.com/articles/winemakers-toil-to-beat-the-heat-of-climate-change-1473857879)
------Grapes are ripening much earlier in the Clare Valley of South Australia. According to Neil Paulett, a winemaker there, grapes “are ripening a month earlier than when he started the wine label that carries his name in the 1980s.” As a result, “Some of Australia’s largest wine companies, along with academics and researchers, are investigating ways to mitigate the impact.” Mitigation involves alternative pruning methods as well and new strains of yeast that are “less efficient at turning sugar into alcohol.” More alcohol “is a problem not only for flavor, but also because some jurisdictions tax wine at a higher rate if it has more alcohol.”
********The three-minute video accompanying the article contains much of the content of the article and is available without a subscription. A good opportunity to hear some Australian English. What is missing from the video, and which I found so dramatic, was the graph that shows “The day grapes hit a certain level of ripeness each year since 1993.” It provides information for Cabernet Sauvignon, Chardonnay, and Shiraz. Each grape had very similar behavior, with dramatically shortening of time to ripeness. “Cabernet Sauvignon grape ripened about 7 weeks earlier than it did in 1993.” Clearly, those who grow grapes and make wine are confronting big challenges. The graphs is the WSJ are largely reproduced at: http://www.theaustralian.com.au/business/winemakers-labour-to-beat-the-heat- of-climate-change/news-story/6a7c5288140114b40773660c72d1acde.
********Wine production in Australia is responding to climate change but wine production in Russia is responding to international sanctions against the country as well as the Russian annexation of 93
Crimea. With regard to the latter, we have “In Russia, Patriotism Now Comes in a Wine Glass” [SR](http://www.wsj.com/articles/in-russia-patriotism-now-comes-in-a-wine-glass-1473896193). “Russian wine production—on the wane before the Ukrainian conflict—jumped nearly 25% in 2015 from the year before . . . and vintners say it is on the rise again this year.” Although wine may be enjoying a renaissance in Russia, it hasn’t been easy to find wines of sufficient quality for some in the restaurant business. “Konstantin Pilberg, the chief sommelier at Lavka-Lavka, a farm-to-table restaurant that boasts locally sourced cuisine, said he tried 550 Russian wines before finding 33 that made the cut to be on the restaurant’s rotating wine list.” History has been one of the factors that has held back the development of an indigenous wine industry. “In the 1980s, Soviet leader Mikhail Gorbachev launched a sobriety campaign, in which most of the country’s grape vines were cut down.”
(17 September 2016): “Buttonwood: Trust busting” (http://www.economist.com/news/finance-and- economics/21707193-dangerous-contradiction-between-economic-reality-and-political-rhetoric-trust)
********A concise statement of the role trust plays in economic and political affairs. It points to the challenges posed by a decline in trust. The paragraph that follows ties things up nicely.
------“Trust is built into the heart of almost all economic activity. Once humans specialized, they required others to produce what they themselves did not—the farmer needed the blacksmith to produce his tools, the blacksmith need the farmer to supply his food. . . . Any hint of a general erosion of trust—of a retreat to the kind of economic nationalism that marked the 1930s—would be a very worrying sign.”
********Trust is a topic that has received increasing attention in economics and neighboring disciplines in recent decades. The book that came first to mind is Trust: The Social Virtues and the Creating of Prosperity (https://www.amazon.com/Trust-Social-Virtues-Creation- Prosperity/dp/0684825252/), by Francis Fukuyama, although a glance at the Table of Contents does not suggest that he discusses changes in trust within a society. The author of Buttonwood concludes by noting “Today’s economy and financial system depend on global co-operation; today’s political system is one where such co-operation is increasingly seen by voters as intrinsically suspicious. That is a dangerous disconnect.”
(17 September 2016): “The superstar company: A giant problem” (http://www.economist.com/news/leaders/21707210-rise-corporate-colossus-threatens-both- competition-and-legitimacy-business)
------“Disruption may be the buzzword in boardrooms, but the most striking feature of business today is not the overturning of the established order. It is the entrenchment of a group of superstar companies at the heart of the global economy. . . . As our special report this week makes clear, the superstars are admirable in many ways. . . . But they have two big faults. They are squashing competition, and they are using the darker arts of management to stay ahead. Neither is easy to solve. But failing to do so risks a backlash which will be bad for everyone.” The increasing concentration of 94
economic activity “is at its most worrying in America. The share of GDP generated by America’s 100 biggest companies rose from about 33% in 1994 to 46% in 2013.” Furthermore, “The five largest banks account for 45% of banking assets, up from 25% in 2000. In the home of the entrepreneur, the number of startups is lower than it has been at any time since the 1970s.”
********The Special Report referred to above can be found at: http://www.economist.com/printedition/2016-09-17. It seems that antitrust thinking (and political will) has not kept up with globalization and the network economies of the internet.
(19 September 2016): “Drugmakers fight state opioid limits amid addiction crisis” (http://www.citizen-times.com/story/news/2016/09/18/drugmakers-fight-state-opioid-limits-amid- addiction-crisis/90622452/)
------“The makers of prescription painkillers have adopted a 50-state strategy that includes hundreds of lobbyists and millions in campaign contributions to help kill or weaken measures aimed at stemming the tide of prescription opioids, the drugs at the heart of a crisis that has cost 165,000 Americans their lives and pushed countless more to crippling addiction.”
********This is the first of two articles resulting from a joint investigation by the Associated Press and the Center of Public Integrity. It was accompanied, in a sense, by a Guest Commentary by Jill Westmoreland Rose, who is the “U.S. Attorney & Chief Law Enforcement Officer for the 32 westernmost counties in” North Carolina. You can find it at: http://www.citizen- times.com/story/opinion/contributors/2016/09/16/guest-columnist-opioid-heroin-abuse-national- epidemic/90497640/. The second installment of the two-part investigation can be found here: https://www.publicintegrity.org/2016/09/19/20201/pro-painkiller-echo-chamber-shaped-policy-amid- drug-epidemic. This site can also be used to access the first installment of the series. Valuable background for the Commentary by the U.S. Attorney and the two installments is provided by the invaluable Dreamland: The True Tale of America’s Opiate Epidemic (https://www.amazon.com/Dreamland-True-Americas-Opiate-Epidemic/dp/1620402521/), by Sam Quinones.
(21 September 2016): “Warehouse Workers of the Near Future” (http://www.wsj.com/articles/fully- autonomous-robots-the-warehouse-workers-of-the-near-future-1474383024)
------“When Target Corp. decided to revamp one of its biggest California distribution centers, it had a choice. It could build a new warehouse, it could install established technologies for picking products off shelves or it could take a risk on a new breed of robots from a reclusive billionaire. Target went with the billionaire’s bots. Target’s new automatons are from Symbotic LLC, part of a grocery empire run by New England billionaire Rick Cohen. . . . His sales pitch to grocery chains and retailers, including Target, Coca-Cola Co. and Wal-Mart Stores Inc. is simple: Symbotic’s automation system includes autonomous robots that can travel untethered among storage racks in a distribution center. . . . That is in contrast to many other warehouse-automation systems, in which the robots tend to be bolted 95
down or limited to fixed routes or tracks and are less flexible in what they can do.” Cohen notes, “What we’re doing with autonomous bots is not that dissimilar from what Google is doing with autonomous cars . . . I think within five years, it’ll change distribution.” In the low-margin grocery business, automation provides an opportunity to control “the three big costs of conventional human- staffed distribution centers—labor, time and real estate.”
********The key word in the paragraph above is ‘untethered’ and the important note is that untethered bots are like autonomous cars. It is amazing to see how the easier movement of information is now enabling easier movement of things, and this will become more prevalent. Frank Bruni, the vice president of supply-chair operations for Kroger’s, made a telling comment when he said, “Every project we look at, we look at automation as a potential part of it.”
********The article includes a link to a three-minute video that provides an inside look at a warehouse using a variety of bots. The general manager of the warehouse makes an important point, also mentioned in the article, that whereas human beings like the same things to be located in the same place, that is not the case for bots. Consequently, it is possible to store the same things in different places, often times economizing on space. Thus the potential for real estate savings. You can learn more about Symbotic at: http://www.symbotic.com/.
********A counterpoint to the more mechanized developments with regard to warehousing is provided by grass-fed beef. The Wall Street Journal explores this in “Why Grass-Fed Beef Is on a Roll” [SR](http://www.wsj.com/articles/why-grass-fed-beef-is-on-a-roll-1474388110). Reporters Ellen Byron and Sarah Nassauer write that “When many people eat beef, they want to know I the cow ate grass. Grass-fed beef, once a niche luxury, is now sold at ballgames, convention centers and nearly every Wal-Mart in the U.S.” Such beef is perceived by many consumers to be “a healthier, higher- quality alternative to conventional beef and are willing to pay more for it, no matter that labeling—and flavor can be inconsistent.” Although grass-fed beef “comprised just 1.4% of the $18 billion fresh- beef market in the U.S. in 2015, . . . its growth rate has far outpaced conventional beef in recent years . . . Last year, sales of grass-fed beef rose nearly 40% over the year before, while conventional beef grew 6.5% in the same period.” In thinking about the two articles, one on moving packages and one on beef, in one instance we are moving toward something that is more mechanized and in the other less so. Both seem to be responding to the preferences of “the ultimate consumer” for lower prices (moving packages) and higher perceived quality (grass-fed beef) but it seems like we care about how cattle are raised but not care about how packages are moved.
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[The Invisible Forces Weekly: Economics with a Broader View] 284 (28 September 2016)
(22 September 2016): “Bloomberg’s Fifty Most Influential” (https://www.bloomberg.com/features/2016-most-influential/)
********The list shows “who commands the most power in financial markets.” At 1 is Theresa May, the Prime Minister of the United Kingdom; at 50 is comedian John Oliver, who was born in the United Kingdom. In between there is a varied lot, including a surprising number of economist, headed by Janet Yellen, at position eight, just ahead of Warren Buffett. There are fifty blurbs with brief introductions indicating the many ways one can influence financial markets.
(23 September 2016): “Cowboys Turn to High-Tech Ear Tags to Monitor Animal Health” (http://www.wsj.com/articles/cowboys-turn-to-high-tech-ear-tags-to-monitor-animal-health- 1474363802)
------“Drugmakers, startups and cattlemen are betting that sensors and data-sifting software can help keep cattle in Western U.S. feedlots healthier than cowboys can alone. New tags clipped to animals’ ears aim to monitor movement and feeding patterns for early signs of sickness. With low cattle prices pinching ranchers’ profits, developers believe they can save feedlots money on drugs like antibiotics and avoid treating healthy cattle. The tactic also appeals to some health officials and consumers who say antibiotics are overused.”
********Not exactly a Fitbit for cattle but moving in that direction. One company providing the ear tags, Quantified Ag, “currently charges around $18 an animal” for its service. The tags are being developed, in part, to deal with the perception that “Cowboys are somewhat of a dying breed.” Will the ears tags make them even less in demand? You can learn more about Quantified Ag at: http://quantifiedag.com/. Ear tags are especially important on feed lots, where most cattle are raised. There is an interesting four-minute video on the site that provides a glimpse into the thinking behind the development of the tag system.
(23 September 2016): “Supermarkets Make Stars Out of Weird Apples, Knobbled Carrots and ‘Spuglies’” (http://www.wsj.com/articles/in-supermarkets-now-weird-apples-knobbled-carrots-and- spuglies-1474561531)
------[This is the A-Hed (quirk) article.] “Steve Lutz used to sell banged-up apples for a loss on the juice market. Until the day Wal-Mart called. Suddenly, his company was hauling unattractive apples, which had been pelted by hail, out of storage.” Lutz says that his company wasn’t trying “to produce ugly produce” but everything changed when “Wal-Mart Stores Inc. started an ugly-apple pilot project this summer at 300 Florida stores.” Now Lutz worries “about keeping up with demand.” Across the U.S., “Growing appreciation for homely crops, which generally cost less, is giving new life to funny- looking fruit and vegetables. Marketers are trying to cast former castoffs in more flattering light. And growers have turned into judges of produce beauty pageants.” 97
********Those concerned with food waste have helped advance the cause of ugly fruits and vegetables. According to ugly-evangelist Jordan Figueiredo, the “key to getting people into ugly food is to provide the vegetables and fruit with some personality. The number of followers on his Twitter account boomed when he started taking a more playful approach to his work.
(24 September 2016): “One of India’s most-populous states recently banned alcohol. Mayhem ensued.” (https://www.washingtonpost.com/world/one-of-indias-most-populous-states-recently- banned-alcohol-mayhem-ensued/2016/09/23/b25090b8-743e-11e6-9781-49e591781754_story.html)
------“Alcohol is not illegal in predominantly Hindu India, but there has long been a social stigma against it in this conservative country, and state-level bans have become a popular ploy for politicians in India anxious to secure the women’s vote.” Although drinking “is on the increase in India, with rising middle-class affluence, a youth bulge and increased opportunities to dine out . . . rural female voters are becoming more assertive about the predations of alcoholic husbands, and this has become a potent election issue. The southern state of Kerala has begun a phased ban, and neighboring Tamil Nadu is contemplating introducing such a prohibition again after a lapse of several years. But the man who has made the issue his own is the chief minister of Bihar, Nitish Kuman, who instituted the controversial ban after an election-year promise to women voters who complained about their drunken husbands.”
********Evidently these are not elections without consequence. “The anti-alcohol campaign has sent more than 14,000 people to jail since April in a state where the prisons were already overcrowded. . . . Those caught consuming alcohol can face 10 years in prison, and bail can take weeks. But what has set off panic among residents are the draconian provisions in the law, including a clause whereby all adults in a family are now accountable if one member drinks. You can learn more about the state of Bihar, with a 2011 population of 104 million, at: https://en.wikipedia.org/wiki/Bihar. For comparison, the U.S. population in 1920, when Prohibition began, was 106 million (https://en.wikipedia.org/wiki/1920_United_States_Census). Perhaps cultural differences will enable this modern prohibition to persist.
(27 September 2016): “A New Debate Over Pricing the Risks of Climate Change” (http://www.nytimes.com/2016/09/27/business/energy-environment/a-new-debate-over-pricing-the- risks-of-climate-change.html)
------“Some companies, including ExxonMobil, say the economics of climate change are too hard to predict for them to give investors hard numbers about the business impact of global warming. Federal regulators may disagree and are considering requiring Exxon to do just that for its oil reserves. Now a long-shot legislative effort by a Florida congressman to prevent such a move by the federal government has become an unexpected flash point in the battle over disclosing climate-related risks— with potentially hundreds of billions of dollars in the balance. ********The congressman is Representative Bill Posey of Florida. The so-called “Posey amendment” would allow, among other 98
things, “real estate companies to stay mum on the risks posed to waterfront properties by rising seas, for example, and let food companies leave the impact of future water shortages unaddressed.” In short, the amendment if adopted would undermine the value of almost all risk disclosures required by the Securities and Exchange Commission. One group actively involved in examining how to assess the financial risks behind climate change is the Task Force on Climate-related Financial Disclosure (https://www.fsb-tcfd.org/); another group working in the area is the Sustainability Accounting Standards Board (http://www.sasb.org/). The chief executive of the SASB, Jean Rogers, notes: “Climate risk is the most ubiquitous risk out there . . . There’s no excuse anymore [to ignore them]. We know what the risks are, industry by industry.”
********One of the interesting arguments reported in the article is to the effect that climate-related risks are hard to measure precisely, so we shouldn’t try to measure at all. This is a familiar argument, especially for someone who has spent almost all of his adult life in higher education—just substitute ‘learning is’ for ‘climate-related risks are’. Clearly what we need is a more sophisticated notion of measurement.
(27 September 2016): “Trouble Brewing in the Craft Beer Industry” (http://www.wsj.com/articles/trouble-brewing-in-the-craft-beer-industry-1474990945)
------Craft brewers like Creature Comforts Brewing Co. of Athens, Georgia are outgrowing their supply chains. “The brewer has had so much trouble finding enough of a special type of hops called citra . . . that it has been forced to reject orders for about 8,000 barrels of beer during the past year. That is more than $2 million in revenue and enough beer to nearly double production.” Regional brewers including “Wicked Weed Brewing of Asheville, N.C., and MadTree Brewing of Cincinnati have run into similar constraints. The shortages are contributing to the sudden slowdown in craft beer sales. During the first half of the year, independent brewers’ volumes grew about 8%, ending six years of double-digit growth.” The problems “isn’t lack of hops productions. . . . The problem is the rapid proliferation of tiny beer brands from a fiercely competitive and rapidly expanding craft beer industry. Beer drinkers now have an estimated 30,000 different choices from 4,000-plus brewers to pick from, compared with about 20,000 beers from 2,000 brewers five years ago, according to the Brewers Association.”
********The article notes, many small brewers create challenges for hops suppliers, since the suppliers don’t know if the specialty hops wanted by them will still be wanted in the event the brewers go out of business. As a result, “Brokers and so-called hop merchants try to bridge that divide by acting as middlemen—ordering in bulk for several brewers—in addition to storying and shipping hops for them. But that doesn’t always solve the problem with today’s unpredictable consumers.” Like other products, the beer fad of the day may fade quickly.
********At the other end of the size distribution of firms there is AB InBev and SAV Miller. Shareholders of both firms just approved the merger of the two companies in a deal worth over $100 99
billion. “Regulators around the world have already approved the deal, which AB InBev says will create ‘the first truly global brewer.’ The takeover is expected to be formally completed on Oct. 10.” You can learn more about the merger at: http://www.chicagotribune.com/business/ct-ab-inbev- sabmiller-merger-megabrew-20160928-story.html. Will this affect craft brewers or will the merger principally allow AB InBev to generate more profit from its now expanded mass-market beers through cost reductions? Cost reduction have been a focal point of past mergers by AB InBev.
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[The Invisible Forces Weekly: Economics with a Broader View] 285 (5 October 2016)
(29 September 2016): “More Wealth, More Jobs, but Not for Everyone: What Fuels the Backlash on Trade” (http://www.nytimes.com/2016/09/29/business/economy/more-wealth-more-jobs-but-not-for- everyone-what-fuels-the-backlash-on-trade.html)
------“For generations, libraries full of economics textbooks have rightly promised that global trade expands national wealth by lowering the price of goods, lifting wages and amplifying growth. . . . But trade comes with no assurances that the spoils will be shared equitably. Across much of the industrialized world, an outsize share of the winnings has been harvested by people with advanced degrees, stock options and the need for accountants. Ordinary laborers have borne the costs and suffered from joblessness and deepening economic anxiety. These costs have proved overwhelming in communities that depend on industry for sustenance, vastly exceeding what economists anticipated.” Tapping “into the rage of communities reeling from factory closings,” Donald Trump has denounced “trade with China and Mexico” and Hillary Clinton has opposed a free-trade deal “she supported while secretary of state.”
********This lengthy article points clearly to some of the undesirable, possibly unforeseen, consequences of freer trade. It is true, as noted in the article, that few economists have the knowledge or take the time to develop the job-related consequences of expanded trade at a local or regional level, relying instead upon general reasoning based on highly polished general principles. As the article also points out, the disruptions in the U.S. that resulted from freer trade could have been dealt with far better than they were. The erosion of social safety nets over recent decades in the guise of a smaller federal government have ensured that those most disadvantaged by trade have not had the resources and support to adapt to the new trading environment.
********Here is a passage in the article that stood out for me: “The beneficiaries of this surge [in trade with China] include anyone who has bought practically anything touched by human hands . . . The casualties of China’s exports are far fewer, but they are concentrated.” This notion of diffuse benefits and concentrated costs is a familiar one in economics, although it is usually presented in the context of concentrated benefits and diffuse costs. In the latter case, when benefits from an action are concentrated, those who will benefit from them will be willing to spend a lot to enable it but those who will not benefit will be willing to spend little to avoid it. The difference between the two cases, though, is that things will not go back to the way they were if trade were to be reduced or cease.
(29 September 2016): “A Growth-Friendly Climate Change Proposal” [SR](http://www.wsj.com/articles/a-growth-friendly-climate-change-proposal-1475079939)
------Polarized politics in Washington, D.C. have made it hard to “reconcile two divergent priorities: climate change and economic growth. Across the country, however, voters are being offered a plan that does just that. In November, Washington state will vote on the country’s first revenue-neutral carbon tax. By embedding the cost of carbon dioxide emissions in the price consumers and businesses 101
pay for energy, such a tax automatically encourages conservation and makes renewable energy more appealing, without regulations and subsidies that distort investment and undercut growth. Because the revenue is use to cut other taxes, it doesn’t crimp incomes or undermine business competitiveness. In environmentally conscientious Washington state, Initiative 732, as the ballot initiative is known, ought to be a slam-dunk. It isn’t—a poll shows voters roughly split. The reasons are a window into why climate policy is so polarizing.”
------Initiative 732 “is modeled on a similar levy introduced in British Columbia in 2008.” Surprisingly, resistance to it has been coming from the left, not the right as is more common. The reasons for the resistance are multiple, “But the main reason is that I-732 sends its revenue back to taxpayers, whereas environmentalists would like the revenue for other priorities.” For example, “The Washington Environmental Council, which doesn’t support I-732, says revenue from any climate initiative should be plowed into the ‘clean energy economy . . . infrastructure for clean, abundant water and healthy forests’ and assistance for ‘the most vulnerable workers and communities.’ Rather than compromise, other climate activists have sought to oust their political opponents—usually Republican.”
********You can learn a good deal more about I-732, with background, design, and the exact text of the measure, at: https://ballotpedia.org/Washington_Carbon_Emission_Tax_and_Sales_Tax_Reduction,_Initiative_732 _(2016). A simple search on “I-732” will identify a lot of interesting articles, including the names of a number of environmental groups advocating different positions on the measure. The site Ballotpedia: The Encyclopedia of American Politics (https://ballotpedia.org/Main_Page) looks like one to remember.
********This situation reminded me of the quotation “Politics is the art of the possible,” which is attributed to Otto von Bismarck. Evidently this is a fragment of the original statement (in German), which is: “Politics is the art of the possible, the attainable—the art of the next best” (https://www.quora.com/What-do-people-think-about-the-saying-politics-is-an-art-of-compromise-by- Otto-Von-Bismarck). You can learn more about Bismarck at: https://en.wikiquote.org/wiki/Otto_von_Bismarck. Bismarck was very quotable.
(29 September 2016): “Why so many of America’s sushi restaurants are owned by Chinese immigrants” (https://www.washingtonpost.com/news/wonk/wp/2016/09/29/the-fascinating-story- behind-who-opens-sushi-restaurants-and-why/)
------“From Ames, Iowa, to Lancaster, Pa., Chinese Americans have opened many of the sushi joints that dot suburban malls and city blocks across the country. It’s the result of what experts describe as a striking convergence between U.S. ethnic-food preferences and the economic pressure facing a new wave of Chinese immigrants, whose population in the United States has tripled in the past 25 years.” According to those who have studied “the outsize role of Chinese Americans in the Japanese food 102
business, . . . The influx of low-wage Chinese immigrants . . . has created fierce competition to provide cheap food. At the same time, Japan’s wealth and economic success helped its cuisine gain a reputation as trendy and refined. So for many entrepreneurial Chinese immigrants looking to get ahead, Japanese food has often become the better opportunity.” As noted by Krishnendu Ray, who heads NYU’s food studies program, “Chinese entrepreneurs have figured out that this is a way to make a slightly better living and get out of the . . . world of $10, $5 food at the bottom end of the market.”
********A past Japanese Ministry of Agriculture estimate found that “only about a tenth of Japanese restaurants in the States were run by people of Japanese descent.” The article provides average meal price data for a variety of cuisines, with Japanese near the top (surpassed by French) at $62.73 and Chinese near the bottom at $32.78; Thai food was at the bottom. I found interesting the point made by Krishnendu Ray, that “Foods we associate with poor immigrants tend to be cheap, and we are generally not willing to pay a higher price for it.” Also useful to see is the meal price distribution of Chinese and Japanese cuisines, which is astonishing. Although the ingredients of Japanese cuisine may be costlier than Chinese, it is easy to see why a Chinese restauranteur choosing to focus of Japanese cuisine.
(1 October 2016): “Why Deep Learning is Suddenly Changing Your Life” (http://fortune.com/ai- artificial-intelligence-deep-machine-learning/)
********This lengthy article provides something of a primer of the “deep-learning revolution” that is overtaking modern life. At the root of this revolution is “a family of artificial intelligence (AI) techniques popularly known as deep learning, though most scientists still prefer to call them by their original academic designation: deep neural networks.” Although neural nets aren’t new, “What’s changed is that today computer scientists have finally harnessed both the vast computational power and the enormous storehouses of data . . . that, it turns out, are essential to making neural nets work well.” As an example of scope of the changes underway, “Google had two deep-learning projects underway in 2012. Today it is pursuing more than 1,000, according to a spokesperson, in all its major product sectors, including search, Android Gmail, translation, maps, YouTube, and self-driving cars.”
********Self-driving cars, of course, are much in the news. I found it interesting that the 7th episode—“Driven”—of the 7th season of the TV show “The Good Wife” was devoted to the topic. In doing so, it provides a clear discussion of the deep learning involved in such cars, as well as some potential problems.
(1 October 2016): “Anti-globalists: Why they’re wrong” (http://www.economist.com/news/leaders/21707926-globalisations-critics-say-it-benefits-only-elite- fact-less-open-world-would-hurt)
------The advocacy of free-trade has a lengthy history. “In September 1843 the Liverpool Mercury reported on a large free-trade rally in the city. . . . John Bright, a newly elected MP, spoke eloquently on the merits of abolishing duties on imported food, echoing arguments made in The Economist, a 103
fledgling newspaper. . . . His speech in Liverpool was roundly cheered. It is hard to imagine, 173 years later, a leading Western politician being lauded for a defence of free trade. Neither candidate in America’s presidential election is a champion. Donald Trump, incoherent on so many fronts, is clear in this area: unfair competition from foreigners has destroyed jobs at home. He threatens to dismantle the North American Free Trade Agreement, withdraw from the Trans-Pacific Partnership (TPP) and start a trade war with China. To her discredit, Hillary Clinton now denounces the TPP, a pact she helped negotiate. . . . The backlash against trade is just one symptom of a pervasive anxiety about the effects of open economies. . . . But there is a world of difference between improving globalization and reversing it. The idea that globalisation is a scam that benefits only corporations and the rich could scarcely be more wrong.”
********This article is one of the leaders for the week. It provides an introduction, of sorts, for the subsequent Special Report: The World Economy, contained in the issue. You can access the various parts of the Report at: http://www.economist.com/printedition/2016-10-01. Trade is one of two elements of the modern economic world that is being increasingly challenged in recent years. The other is limited liability company, a brief discussion of which is presented in “Schumpeter: Don’t limit the revolution” (http://www.economist.com/news/business/21707938-all-its-virtues-limited-liability- continues-provoke-criticism-dont-limit-revolution). The soon-to-be-released Limited Liability: A Legal and Economic Analysis (https://www.amazon.com/Limited-Liability-Legal-Economic- Analysis/dp/1783473029), by Stephen M. Bainbridge and M. Todd Henderson, provides a “comprehensive economic analysis of the policy debate surrounding the laws governing limited liability.”
104
[The Invisible Forces Weekly: Economics with a Broader View] 286 (12 October 2016)
Occasional remark. Yesterday—October 11th—while searching for a book at Amazon using the terms ‘economics’ and ‘journalism’, I learned that Democracy’s Detectives: The Economics of Investigative Journalism (https://www.amazon.com/Democracy%E2%80%99s-Detectives-Economics- Investigative-Journalism/dp/0674545508/), by James T. Hamilton, was released on the previous day. Such good luck. As the Amazon blurb states, “In democratic societies, investigative journalism holds government and private institutions accountable to the public. From firings and resignations to changes in budgets and laws, the impact of this reporting can be significant—but so too are the costs. As newspapers confront shrinking subscriptions and advertising revenue, who is footing the bill for journalists to carry out their essential work? . . . Drawing of a painstakingly assembled data set of thousands of investigations by U.S. journalists, James T. Hamilton deploys economic theories of markets and incentives to reach conclusions about the types of investigative stories that get prioritized and funded.”
Hamilton is the Director of the Stanford Journalism Program and hopes to “help surface the problems faced by journalists to those looking to use computational methods to solve puzzles that benefit society” (https://www.amazon.com/James-T.- Hamilton/e/B000APG2F2/ref=dp_byline_cont_book_1). The Stanford Computational Journalism Lab (http://cjlab.stanford.edu/) is involved in this work. This seems like an interesting new direction for “Big Data.” Somewhat related is the upcoming Pew Charitable Trust webcast—Friday, October 14th—on “Data-Driven Decision-Making at the State and Local Level.” Colorado Governor John Hickenlooper will kick off “a series of discussions on evidence-based governing, with a special focus on election administration and tax incentives.” You can learn more about the event (and watch it) at: http://www.pewtrusts.org/en/about/events/2016/governing-by-the-numbers. The event runs from 9:00 am to noon Mountain Time.
Democracy’s Detectives has already received the attention of some notable entities and I suspect that it will be reviewed frequently in the weeks to come. One source to learn more about the book is Nonprofit Quarterly (https://nonprofitquarterly.org/2016/10/11/new-book-attempts-define- value-investigative-journalism/), which discusses the “business model crisis” of investigative journalism and notes a few organizations doing investigative journalism as traditional newspapers have done less. The NQ also, happily, drew my attention to The Poynter Institute, “one of the world’s leading resources for journalism and consequently civil society.” As mentioned, when Poynter recommends a new book, readers should take note. You can learn more about the Institute and read what it had to say about Hamilton’s book at: http://www.poynter.org/2016/an-economist-makes-the- case-for-saving-investigative-journalism/433481/.
Regarding the Institute’s article, those in North Carolina will want to pay particular attention to the coverage of former reporter Pat Stith. Specifically, “there is a 70-page chapter on the career of a single investigative reporter—Pat Stith of the News and Observer of Raleigh, a sort of micro-economic 105
window into the craft.” Stith, and two other colleagues, won a Pulitzer Prize in 1996 for work “on the environmental and health risks of waste disposal systems used in North Carolina’s growing hog industry” (http://www.pulitzer.org/winners/news-observer-raleigh-nc-work-melanie-sill-pat-stith-and- joby-warrick).
(1 October 2016): “The Federal Reserve: Man in the dock” “(http://www.economist.com/news/books- and-arts/21707908-was-alan-greenspan-blame-financial-crisis-man-dock)
------[A review of The Man Who Knew: The Life and Times of Alan Greenspan (https://www.amazon.com/Man-Who-Knew-Times-Greenspan/dp/1594204845/), by Sebastien Mallaby.] “Mr. Mallaby, formerly a journalist at The Economist and now a senior fellow at the Council on Foreign Relations in New York, takes readers on a long journey from Mr Greenspan’s childhood as the adored and awkward son of a single Jewish mother in New York, through his period as a ‘sideman’ in a jazz band, his professional life as a data-obsessed forecaster, his engagement in Republican politics, his 18 years as chairman of the Federal Reserve and, finally, the post-crisis collapse of his reputation. Through the lens of this stellar career, the book also throws a sharp light on American policy and policymaking over four decades.”
********Serving 18 years and five months, Greenspan was the second longest-serving chair of the Federal Reserve System, following William McChesney Martin (http://www.ibtimes.com/who- longest-serving-federal-reserve-chairman-history-1491906) who served 18 years and nine months. At 780 pages, this book is quite long but it seems like one worth reading. According to reviewer Randall S. Kroszner, “despite its nearly 700 pages of text, the book is hard to put down, thanks to Mr. Mallaby’s knack for finding just the right example or sparkling quotation to illustrate his points” [SR]( http://www.wsj.com/articles/sebastian-mallabys-biography-shows-that-alan-greenspan-foresaw-the- housing-crisis-why-didnt-he-act-1475877299). It’s a pity that Kroszner’s review requires a subscription, as he provides a knowledge and sympathy for both writer and subject that makes his review come alive. As he notes, “Alan Greenspan’s intellectual journey began with Ayn Rand, who was introduced to him by his first wife in 1953.” Over time, “Mr. Greenspan evolved a practical view of political economy in part, Mr. Mallaby says, because he was ‘mugged by reality.’” I am very curious about Greenspan’s intellectual odyssey: How did he get from Ayn Rand to the Federal Reserve?
********In connection with the above, The Man Who Knew is on the shortlist for the Business Book of the Year of The Financial Times. You can see the complete list at: http://aboutus.ft.com/2016/09/07/financial-times-and-mckinsey-announce-shortlist-for-2016-business- book-of-the-year-award/#axzz4MWAypCcZ. There are six books on the list, including What Works: Gender Equality by Design (https://www.amazon.com/What-Works-Gender-Equality- Design/dp/0674089030). There may be some valuable insights in this book for the political leaders of Asheville, as they seek to address local equity issues, as mentioned by Mayor Esther Manheimer in her 106
recent State of the City address. You can learn more at: http://www.citizen- times.com/story/news/local/2016/10/04/mayor-us-racial-divide-asheville-eyes-equity/91532542/.
(6 October 2016): “Wind Is the New Corn for Struggling Farmers” (http://www.bloomberg.com/news/articles/2016-10-06/wind-is-the-new-corn-for-struggling-farmers)
------“Wind energy, the fastest-growing source of electricity in the U.S., is transforming low-income rural areas in ways not seen since the federal government gave land to homesteaders 150 years ago. As commodity prices threaten to reach decade lows and farmers struggle to meet debt payments, wind has become the newest cash crop, saving family farms across a wide swath of the heartland.”
********Power companies have invested more than $100 billion on wind power “in low-income counties—where about 70 percent of wind farms are located—has helped double assessed land values in some of the poorest parts of rural America. That’s provided a much-needed infusion of local tax revenue that’s being used to rebuild schools and pay down debt.” All this points to the intricacy of the relationships of policy and outcomes in relation to energy. This makes me think of the alternative uses of land in the mining areas of the Appalachians and the farming areas of the Midwest, e.g., Iowa. As a result of policy and wind patterns, it seems, the Midwest is likely to be better able to adapt to changes in the energy landscape than the Appalachians.
(7 October 2016): “Foodies Can Order Meats From a Single Animal” [SR](http://www.wsj.com/articles/foodies-can-order-meats-from-a-single-animal-1475690882)
------“In grocery store cases stuffed with exotic grass-fed and organic meats, new ‘single-origin’ cuts are taking the local food craze to new heights. Retailers including Whole Foods Market Inc., FreshDirect, and Amazon.com Inc. are building farm-to-store meat operations that sate some consumers’ desires to trace their burger or bacon all the way back to an individual animal.” One such purveyor is 26-year-old Hannah Raudsepp, the founder of Honest Beef, who “buys cattle directly from her family’s ranch in the Nebraska Sandhills. She pays a small plant nearby to butcher and dry-age them, one at a time. Then Ms. Raudsepp matches online orders with carcasses coming down the line, and ships directly to consumers who order at least $85 worth of steaks and burgers ‘from one single animal.’” Honest Beef charges $8.50 a pound for its dry-age ground beef, compared to an average August prices elsewhere of $4.25 a pound. “Analysts say the single-origin meat sellers are tapping into demand for meat that consumers see as more ethically raised or butchered.”
********You can learn more about Honest Beef at: https://www.honestbeefco.com/. During the two minutes or so that I was online I learned that someone from Hendersonville, North Carolina purchased a sirloin share, so customers are “in the neighborhood.” This is a market that is so new that many of its supporting structures. For example, “Because so few of these [single-origin] farms now exist, Whole Foods had to invest in farms and slaughter plants to meet customer demand for ‘whole animal’ products,” according to the company’s global meat buyer. This new market evokes many thoughts. Perhaps you have one? 107
(9 October 2016): “Sending Potatoes to Idaho? How the Free Market Can Fight Poverty” (http://www.nytimes.com/2016/10/09/upshot/sending-potatoes-to-idaho-how-the-free-market-helps- food-banks.html)
------“Skepticism about capitalism and free markets is rising. A survey by the Harvard Institute of Politics found that a majority of 18-to-29-year-old Americans do not believe in modern capitalism at all. . . . Yet food banks, the organizations at the forefront of the fight against hunger, haven’t given up on free markets at all—to the contrary, they are increasingly relying on them. How this unlikely marriage happened, and what it teaches us about markets, is an important story. It is embedded in the research of Canice Prendergast, an economics professor at the University of Chicago Booth School of Business who documented the innovations of Feeding America, a large nonprofit organization that collects and distributes hundreds of millions of tons of food to more than 200 food banks throughout the United States.”
********The research mentioned in the article is “The Allocation of Food to Food Banks,” which can be read at: http://faculty.chicagobooth.edu/canice.prendergast/research/food4.pdf. What struck me as especially noteworthy in the article is its discussion of the objections to free markets, which tend to be based on two issues: “First, goods go to the highest bidder; second, bidders possess different amounts of wealth. Disentangling these two factors is important. When markets produce outcomes that seem unfair, it is usually the second factor—the wealth disparity—that is to blame. Place bidders on an equal footing and the superior efficiency of the market becomes evident.” As this idea is explored, the approach (and success) of Feeding America becomes easier to understand.
********As I read the article it seemed to contain a familiar story. After some searching, I found that a somewhat similar story showed up in TIF Weekly 242. The story was “The Pickle Problem” and it showed up in an 18-minute NPR podcast. You can listen to it at: http://www.npr.org/sections/money/2015/11/25/457408717/episode-665-the-pickle-problem.
(11 October 2016): “Oliver Hart and Bengt Holmstrom Win Nobel in Economics for Work on Contracts” (http://www.nytimes.com/2016/10/11/business/nobel-economics-oliver-hart-bengt- holmstrom.html)
------“Oliver Hart and Bengt Holmstrom were awarded the Nobel Memorial Prize in Economic Science on Monday for their work on improving the design of contracts, the deals that bind together employers and their workers, or companies and their customers.”
********You can learn substantially more about the Noble recipients and their work at: https://www.nobelprize.org/nobel_prizes/economic-sciences/laureates/2016/press.html. Be sure to check the various links on the left-hand-side of the screen. Another useful source for information on the Nobel Prize in economics in recent years can be found in the October 11 post of Economic Principals at: http://www.economicprincipals.com/. Its proprietor, David Warsh, is a journalist who has focused his attention on the economics profession. 108
[The Invisible Forces Weekly: Economics with a Broader View] 287 (19 October 2016)
(10 October 2016): “Grass Warfare in L.A.” (https://www.bloomberg.com/features/2016-turf- terminators-grass-war/)
------The five-year drought in California has many Californians reconsidering the “American dream” of green, well-watered lawn and some governmental agencies have put money behind movement to eliminate grass lawns and replace them with something requiring less water. One of those agencies is the Metropolitan Water District of Southern California, “the country’s biggest municipal supplier” of water. However, rebates provided by it and the Los Angeles Department of Water and Power have encouraged the emergence of a variety of businesses that have ripped up lawns and replaced them with gravel and ill-suited plants. The city controller of Los Angeles, Ron Galperin, has concluded that the rebates for turf replacement were “largely a gimmick. The turf replacement gave . . . the lowest return on investment [compared to] other conservation programs.” For example, “water-efficient washing machines or toilets.”
********Given the likelihood that many more municipalities will face droughts like those in California, the experience of Los Angeles is worthy of reflection.
(10 October 2016): “Coke and Pepsi Give Millions to Public Health, Then Lobby Against It” (http://www.nytimes.com/2016/10/10/well/eat/coke-and-pepsi-give-millions-to-public-health-then- lobby-against-it.html)
------“The beverage giants Coco-Cola and PepsiCo have given millions of dollars to nearly 100 prominent health groups in recent years, while simultaneously spending millions to defeat public health legislation that would reduce Americans’ soda intake, according to public health researchers. The findings, published on Monday in the American Journal of Preventive Medicine, document the beverage industry’s deep financial ties to the health community over the past five years, as a part of a strategy to silence health critics and gain unlikely allies against soda regulations.”
********At the end of the article, NYU professor of nutrition, food studies, and public health Marion Nestle notes that the soda companies “want to have it both ways—appear as socially responsible corporate citizens and lobby against public health measures every chance they get.” The publication upon which this article is based is “Sponsorship of National Health Organizations by Two Major Soda Companies” (http://www.ajpmonline.org/article/S0749-3797(16)30331-2/fulltext). It contains an impressive list of sponsored organizations, as well as a table showing “Lobbying on Soda-Related Public Health Bills, 2011-2015.” The 11-page article is easy to read, devoid of much of the apparatus of academic research, and can be downloaded as a pdf file. It is a good example of the invisible foot and the invisible hand at work, suggesting that investments in public health groups may improve, as Marion Nestle indicates, public perceptions while simultaneously decreasing the probability of regulatory action that would affect the revenues, and presumably profits, of donor firms. 109
********On a related matter, I am now halfway through The Cigarette Century: The Rise, Fall, and Deadly Persistence of the Product That Defined America (https://www.amazon.com/Cigarette- Century-Persistence-Product-Defined/dp/0465070485/), by Allan M. Brandt; Brandt is a professor of the history of medicine at Harvard University. The book one a slew of prizes and was described by the Times Literary Supplement as “A masterpiece of medical history.” Among other things, it provides a well-documented and frighteningly clear narrative of how cigarette companies supported research on cancer-related topics while simultaneously doing everything they could to undermine the science relating to the health effects of cigarette smoking. If we now see such strategies employed by an array of industries now, not to mention politics, it is because they were developed rigorously and with clear intention by cigarette companies in the 20th century. Perhaps one way to look at this book is that it develops in great detail one of the multiple cases examined in lesser detail by Naomi Oreskes and Erik M. Conway in Merchants of Doubt (https://www.amazon.com/Merchants-Doubt-Handful-Scientists- Obscured/dp/1608193942/).
********One of the “other things” I learned from The Cigarette Century showed up in Part II: Science, p. 148. There the three domains of medical knowledge—clinical observations, population studies, and laboratory experiments—are related. What became clear to me in my reading is that depending upon the domain to which a researcher was most closely connected, the assessment of a given research outcome could vary dramatically. That is why, as the book points out, “Demonstrating that smoking caused disease ultimately required important insights integrating clinical, epidemiological, and laboratory investigations.” I wonder if medicine is unusual in that regard or if, properly considered, that might be more general and apply, for example, to a disciplines such as economics.
(12 October 2016): “Out With the Poor, In With the Rich: The Landlord’s Guide to Gentrifying NYC” (http://www.bloomberg.com/news/articles/2016-10-12/get-out)
********This is an article about rent-controlled apartments in New York City and the especially determined efforts of landlord Steve Croman to oust tenants living in them. The motivation is simple—remove tenants currently paying, say, $900 a month, and replace them with new tenants paying, say, $5000 a month. The tactics are many and are discussed in some detail in the article. I found the article to be valuable as “rent-controlled apartments in New York City” is one of the staples in economics courses whenever “price ceilings” (http://www.bloomberg.com/news/articles/2016-10- 12/get-out) are discussed. This article, as they say, puts some “flesh on the bones” of the standard example.
(13 October 2016): “Student Loans: Don’t Call It a Crisis” [SR](http://www.wsj.com/articles/david- wessel-reviews-books-about-student-loans-1476302384)
------[A review of Game of Loan: The Rhetoric and Reality of Student Debt (https://www.amazon.com/Game-Loans-Rhetoric-Reality-Student/dp/069116715X/), by Beth Akers 110
and Matthew M. Chingos, and Student Debt: Rhetoric and Realities of Higher Education Financing (https://www.amazon.com/gp/product/1349949434/), by Sandy Baum. The reviewer is David Wessel, a former columnist for The Wall Street Journal who now works for The Brookings Institution.] “Doing something about ‘the student loan crisis’ is a staple in this year’s political campaigns. Now come three brave economists with a simple message: There is no student loan crisis—if by ‘crisis’ one means that a huge number of Americans are buried under piles of debt for college educations that aren’t paying off. . . . Successfully aimed at non-economists, both books are clearly written. They are light on people and anecdotes, though, so they’re not exactly engaging. They are, however, powerful antidotes to the stereotypes and myths that have grown up around student loans.”
------Sandy Baum, for example, “counts up press accounts like the one about the woman who graduated from Ohio Northern University with $120,000 in loans. Such stories are accurate and troubling, but not at all typical. One scholarly analysis of 100 news stories from 2014 showed that the subjects profiled had borrowed more than $85,000 each. But only 7% of student loan borrowers at the end of 2014 owed more than $75,000, and the vast majority of those had graduate degrees. Two-thirds of all borrowers owed less than $25,000.”
********As a former colleague noted, the issues raised in the press, as well as in the article, is “an example of trying to set policy based on the outlier cases.” Coupled with this is the problem of faulty generalization (https://en.wikipedia.org/wiki/Faulty_generalization): “A faulty generalization is a conclusion about all or many instances of a phenomenon that has been reached on the basis of just one or just a few instances of the phenomenon.” Solving the wrong problem in relation to student loans will likely serve no one.
********One approach to dealing with student loans that is finding some favor bases repayments on the ability of students to repay their loans. Specifically, to base repayments on future earnings. Both Hillary Clinton and Donald Trump have indicated slightly different approaches embracing this idea, one discussion of which can be found at: http://www.marketwatch.com/story/donald-trumps-student- loan-plan-appears-to-take-a-page-from-obamas-book-2016-10-14. Such a plan is currently an option but there are some (easily-fixed) problems with it. You can learn more by reading “The ‘No-Brainer’ Fix To America’s Student Loan Mess” (http://www.bloomberg.com/news/articles/2016-10-12/the-no- brainer-fix-to-america-s-student-loan-mess). Contained within the article is a 15-minute “walking” video conversation on student loans. What struck me especially is that the bankruptcy laws for student laws are more rigorous than loans for tangible goods like automobiles.
(15 October 2016): “The shadow economy: Unregulated, untaxed, unloved” (http://www.economist.com/news/international/21708675-new-technology-may-persuade-informal- businesses-and-workers-become-formal-bringing-light)
------“Moving from the informal to the formal economy can be . . . simple. But in many countries the transition remains rare. Half to three-quarters of all non-agricultural workers in poorer countries 111
(perhaps 2 billion people) fall outside the purview of officialdom and so can be categorized as ‘informal (or ‘shadow’ or ‘grey’). In rich countries the share is much smaller, though still significant. One-tenth of Britain’s economy is thought to be informal. . . . Over the past decade the world’s working-age population has been growing faster than the number of people officially employed, implying that there are more and more people in jobs outside the mainstream.”
********As the article notes, one of the factors leading the way to an increasingly formal economy is the adoption of digital platforms for consumer, and presumably other, transactions. Sweden is well on its way to making paper money a rarity—“Many shops and even bars refuse to accept the folding stuff, and cash machines are hard to find”—but Italians are “lovers of cash.” So, social and historical forces (the invisible handshake) will play a role in determining the speed with which governments (the invisible foot) can seek to bring more consumer transactions (the invisible hand) into the formal economy.
(17 October 2016): “Do Corporate Leaders Need To Pay Taxes?” (http://daily.jstor.org/do-corporate- leaders-need-to-pay-taxes/)
********Did Donald Trump have a fiduciary duty “to minimize his taxes”? As Livia Gershon notes, “Individuals like Trump have no legal duty to keep as much money as possible.” But “for publicly traded companies, the story is a bit different. Federal and state laws assign corporate leaders a rather vague responsibility to take care of the best interests of the company and its shareholders, which some courts have interpreted as a requirement that companies prioritize earning money for shareholders above else.” Gershon then goes on to relate an experiment by Jacob M. Rose, a Bentley University professor conducted an experiment “posing ethical questions to 34 active directors of U.S. Fortune 200 corporations.” He then divided the directors into two groups, “asking 17 of them to address the issues from the perspective of a director of a publicly held company—essentially as they would in real life. The other 17 were told to imagine themselves as partners in a privately held partnership, a role in where there are no public shareholders for management to be responsible. to.” When Rose asked them to evaluate two ethically-charged scenarios, the “directors’ responses varied dramatically depending on whether they thought of themselves as corporate directors or company partners.”
*********The article upon which Gershon’s post is based is “Corporate Directors and Social Responsibility: Ethics versus Shareholder Value,” which was published in the Journal of Business Ethics in 2007. The article can be reached by a link in the post. This is an excellent example of how an assumption about how firms behave, i.e., to maximize the market value of the firm, has been transformed into a directive as to how firms should behave. Obviously this is a point that is not made sufficiently strongly enough by those who have taught (and do teach) corporate finance. (Full disclosure: I am one of those people.) By the way, this article is quite readable and could be used as a basis for similar, possibly identical, questions. 112
(17 October 2016): “How the Chemical Industry Joined the Fight Against Climate Change” (http://www.nytimes.com/2016/10/17/business/how-the-chemical-industry-joined-the-fight-against- climate-change.html)
------“It might seem surprising to find the world’s chemical companies on the front lines of preventing climate change, fighting to disrupt their own industries. But in a sweeping accord reached on Saturday in Kigali, Rwanda, companies including Honeywell and Chemours, a DuPont spinoff, were among the most active backers of a move away from a profitable chemical that has long been the foundation for the fast-growing air-conditioning and refrigeration business. . . . The chemical industry’s response stands in stark contrast to the foot-dragging, and in many cases the outright obstructions of climate regulations, by the big oil companies.”
********The foot dragging in one case and the active backing in another is consistent with whether or not company interests are aligned with environmental interests, as the article seems to indicate. The chemical companies seem to have products that are good substitutes for the hydrofluorocarbons that have been targeted but the “big oil” companies seem not to have them for their traditional products (although this seems to be changing). Environmental experts say that “the Kigali deal was an example of an emerging dynamic, were companies pre-empt environmental policy changes by developing more planet-friendly products, then push for regulation that grows that market.”
(19 October 2016): “Giving Every Child a Monthly Check for an Even Start” (http://www.nytimes.com/2016/10/19/business/economy/giving-every-child-a-monthly-check-for-an- even-start.html)
------“The percentage of children who are poor is more than three times as high in the United States as it is in Norway or the Netherlands. America has a larger proportion of poor children than Russia. So what’s going on? We may spend a lot of money, but we don’t spend it well. It turns out that the most generous federal programs for families with children barely help the nation’s unluckiest children. Rather, they generally push money to their counterparts higher up the ladder of well-being. The child tax deduction—which allows families to exclude $4,000 a child from their taxable income—avoids the poor almost entirely. Just over 1 percent of the $40 billion it costs the federal budget every year flows to the poorest fifth of the population. That works out to an average benefit of $10 a poor family, according to calculations by the nonpartisan Tax Policy Center.” Although Presidential candidate Hillary Clinton has proposed increasing an existing tax credit to better support poor children, “there is an opportunity for even bolder action. Why not get rid of the child tax credit and the child deduction entirely, and instead provide a monthly check of $250 for every child in the country, to guarantee a minimum level of well-being?”
********I found the column by Eduardo Porter to be provocative. The point about the poor deriving little benefit from the child tax deductions is clear, powerful, and obvious once stated (but seldom stated). I’m not sure I would advocate for the same check to every child, which though equal does not 113
seem equitable. Still, as Porter notes, we have an opportunity to rethink how our governments deal with the children of the poor, indeed all children. During a “normal” election year, we might have heard some proposals along these lines. But it is not such a year.
(19 October 2016): “Nevada Voters Weigh Deregulation of Electricity Market” [SR](http://www.wsj.com/articles/nevada-voters-weigh-deregulation-of-electricity-market- 1476792006)
------“Nevada is the latest battleground in a national political fight over whether consumers and businesses should be able to choose where they buy electricity. A November ballot measure backed by Las Vegas casinos and other firms would end the monopoly of the state’s largest utility, NV Energy, owned by Warren Buffett’s Berkshire Hathaway Inc., and create a competitive retail power market where customers could choose their provider. . . . If the campaign ultimately succeeds, Nevada would join New York, Texas and about a dozen other states where consumers and businesses can choose their electricity provider.” According to Kira Fabrizio of Boston University’s Questrom School of Business, “In state after state, regulators are being pushed to revisit some core aspects of utility regulation in order to accommodate the future model of what electric utilities are going to look like.”
********Yet another instance of the dramatic change taking place in U.S. electricity markets. Gone, it seems, are the days of “knee jerk” thinking about natural monopoly (https://en.wikipedia.org/wiki/Natural_monopoly).
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[The Invisible Forces Weekly: Economics with a Broader View] 288 (26 October 2016)
(21 October 2016): “K Street gearing up for peak busy season” (https://www.washingtonpost.com/news/powerpost/wp/2016/10/21/k-street-gearing-up-for-peak-busy- season/)
********”K Street” is the verbal shorthand for the lobbying industry as it relates to the federal government (https://en.wikipedia.org/wiki/K_Street_(Washington,_D.C.). Although it “many of the largest lobbying firms have move out” since the late 1980s, the term continues to be used. Building up its “fame,” HBO created a short-lived TV series about it (https://en.wikipedia.org/wiki/K_Street_(TV_series)). With that background, here is the article.
------“Every four years, while the rest of the nation heads to the polls, Washington’s coterie of lobby firms works overtime to tend to a mad rush of demands from corporate clients who all want to know the same thing: How do we best lobby a new president? A new Congress? That season is now upon us. The fall and winter that bookend a presidential election are the busiest months for K Street’s hired guns. Late October is particularly harried, as they scramble to draw up contingency plans mapping out all potential outcomes of the election—presidential, House and Senate—and how companies should adjust their lobbying strategies accordingly.”
********Presumably corporations are not the only organizations looking to get “an edge” with a somewhat different cast of players after the election. Clearly, the legal environment constructed by the political process influences the demand and supply of many—one might well say all—goods and services. In the work of the denizens of K Street, the connections between the invisible foot and the invisible hand are most easily seen.
(24 October 2016): “Odd Lots: Why Everyone Is Freaking Out About Globalization” (http://www.bloomberg.com/news/articles/2016-10-24/odd-lots-why-everyone-is-freaking-out-about- globalization)
********The title of this 34-minute podcast is somewhat overstated but it is a clear discussion of some of the issues associated with globalization from the 1990s on. This “Odd Lots” podcast is hosted by Tracy Alloway and Sid Verma, with the latter sitting in for the travelling Joe Weisenthal. Their guest is Dani Rodrik, a professor of International Political Economy at Harvard University, who “was writing about the downside of globalization before it was cool.” One of his books on the topic is The Globalization Paradox: Democracy and the Future of the World Economy (https://www.amazon.com/Globalization-Paradox-Democracy-Future-Economy/dp/0393341283). The talk was wide ranging and I am going to resist the temptation to summarize it. There were two things, though, that clearly stood out for me. First, the statement that the current main constraint on the global economy is “Legitimacy, not lack of openness.” This statement is put in context from 18:00 to 19:00 minutes in the podcast. Somewhat related is the discussion of the World Trade Organization and the Trans Pacific Partnership that takes place between 20:00 and 23:00 of the podcast. Here Rodrik 115
distinguishes between a concern for free trade and a concern for reduced regulation, noting that that the WTO and the TPP were (are) not about free trade but about regulation. In elaborating upon this he quickly mentions the Investor-state dispute settlement process (ISDS) that has drawn so much attention by a variety of individuals and groups.
********You can learn more about ISDS at: https://en.wikipedia.org/wiki/Investor- state_dispute_settlement or https://ustr.gov/about-us/policy-offices/press-office/fact- sheets/2015/march/investor-state-dispute-settlement-isds. A search on “ISDS Warren” will reveal an argument by Senator Elizabeth Warren about the ISDS especially as it relates to the TPP. Another perspective is provided by The Heritage Foundation at: http://www.heritage.org/research/reports/2016/05/straight-talk-on-the-isds-provisions-in-the-trans- pacific-partnership.
(25 October 2016): “Record Green Power Installations Beat Fossil Fuel for First Time” (http://www.bloomberg.com/news/articles/2016-10-25/record-green-power-installations-beat-fossil- fuel-for-first-time)
------According to the International Energy Agency, “New installations of renewable energy overtook conventional power for the first time in 2015 . . . Global green power rose by a record 153 gigawatts, equivalent to 55 percent of newly installed capacity last year. Total installed capacity exceed coal for the first time, the IEA said.” The Medium-Term Renewable Energy Market Report of the Agency noted that “About 500,000 solar panels were installed each day across the globe in 2015.” The IEA “raised its estimate of the amount of green energy on power grids by 13 percent, revising its forecast to 42 percent by 2021.”
********The IEA publishes a variety of Medium-Term Reports for sale. You can learn more about them at: http://www.iea.org/publications/medium-termreports/. Just a bit more free information is provided at: https://www.iea.org/newsroom/news/2016/october/iea-raises-its-five-year-renewable- growth-forecast-as-2015-marks-record-year.html.
(26 October 2106): “Newspapers Are Social Media” [SR](http://www.wsj.com/articles/newspapers- are-social-media-1477436218)
------[A review of The Content Trap: A Strategist’s Guide to Digital Change (https://www.amazon.com/Content-Trap-Strategists-Digital-Change/dp/0812995384/), by Bharat Anand. Anand, trained as an economist, is a professor of business administration at Harvard Business School.] “Digitization exposes weak links. Then it breaks them. So much so that it makes you wonder what people were thinking in the first place. According to Bharat Anand . . . the weakest link is between producing content and everything else. Such connections ‘are at the heart of what shapes any digitally touched business today.’ He looks at the content assumptions behind various industries and shows the ways in which, over time, they can become an obstacle to success. To see why, consider the news. By the end of the 20th century, the master plan for a newspaper in a major 116
metropolitan area was something like this. Step 1: Produce great journalism. Step 2: Become a trusted news source . . . Step 3: Use that reputation to get subscribers. Step 4: Offer the readers up to advertisers. Step 5: Market the weekend edition to nonsubscribers. And, finally, Step 6: Use the virtuous circle (readers beget advertisers beget more advertisers) to charge high ad prices.” Steps 1 and 2 focus on content creation, and for newspapers “Digital technologies break the plan somewhere between steps 3 and 4.” In effect, “Mr. Anand argues that concentrating on content—steps 1 and 2— can blind you to ways of getting to step 6.”
********The Asheville-Citizen Times recently (25 October 2016) that is was laying off full-time employees (http://www.citizen-times.com/story/news/local/2016/10/25/gannett-layoffs-impact-citizen- times/92737022/). Furthermore, staff cuts at The New York Times and The Wall Street Journal are in process. So, a book like Anand’s can provide prospective on what they are going through and, perhaps, how they might address the challenges they face. The distinction between content and connection seems like an important one and reminds me of Peter Drucker’s magnum opus Management: Tasks, Responsibilities, Practice (https://www.amazon.com/Management- Responsibilities-Practices-Peter-Drucker/dp/0887306152/). There (p. 49) he asks, “What is our business and what should it be?” It seems like Anand is pointing out that, in an age of digital technology, businesses—all organizations?—must ask these questions anew. Regarding questions, it is good to recall a concise book about them: The Five Most Important Questions You Will Ever Ask About Your Organization (https://www.amazon.com/Five-Important-Questions-About- Organization/dp/0470227567/).
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[The Invisible Forces Weekly: Economics with a Broader View] 289 (2 November 2016)
(28 October 2016): “More Wretched News for Newspapers as Advertising Woes Drive Anxiety” (http://www.nytimes.com/2016/10/28/business/media/buyouts-wall-street-journal-bad-news-for- newspapers.html)
------“Across the country, those working in the newspaper industry are fretting as the end of the year approaches. Driving much of the anxiety is a steep drop in print ad revenue, once the lifeblood for newspapers. Spending on newspaper advertising in the United States is projected to fall 11 percent this year, to about $12.5 billion, according to the Interpublic Group’s Magna. At the same time, digital advertising and other forms of revenue have been slow to pick up the slack, leading news companies, including The New York Times, The Guardian and Gannett, the owner of USA Today, to cut costs by downsizing. . . . Across the industry, similar declines in print advertising coupled with the shift to digital and, increasingly, mobile, are driving newspaper companies to reconfigure their newsrooms.”
********It would be interesting and useful to know what has happened to the sum of print and digital advertising for respective newspapers. Have ad revenues fallen even as a new source of revenue come into being? My sense is that the answer is “No.” That being the case, reducing cost through newsroom configuration is easy to understand. But there are so many more outlets at which to place ads than was once the case. One wonders: “How the proposed AT&T and Time Warner merger relates to all of this?” Still, I am intrigued by a statement that appears in an article by the Public Editor of The New York Times (http://publiceditor.blogs.nytimes.com/2015/04/10/a-darker-narrative-of-prints-future- from-clay-shirky/), “Society doesn’t need newspapers. What we need is journalism.” If we are faced with a continuing decline in the newspapers, where will be get that journalism?
(28 October 2016): “The two reasons it really is harder to get a job than it used to be” (https://www.washingtonpost.com/news/wonk/wp/2016/10/28/why-it-really-is-harder-to-get-a-job- than-it-used-to-be/)
------Since the 1990s it “the labor market seems to have lost much of its natural buoyancy. The past three downturns caused extended periods of underemployment. Years after economic output had fully rebounded, there were still fewer people at work.” Two views are being used to explain these “jobless” recoveries. One is that “recessions are times when companies clean house and find ways to become more efficient. In recent decades, that has often meant replacing employees with computers.” In effect, these “positions became obsolete.” But there seems to be something else at work, which is the “upskilling” of work. “After a recession, the remaining job openings may become harder to fill because employers start to demand people with better skills, who can adapt to new technologies in order to be more productive.” In summary, “it’s not just that many jobs go extinct during a recession. Even the surviving jobs sometimes shift beyond recognition—and beyond the reach of many.”
********At the end of the article economist Brad Hershbein is quoted as follows: “People need to constantly be learning and keeping their skills up to date as technology changes and evolves . . . If you 118
learned how to do one thing and do it well for 15 or 20 years, and that’s all you really learned how to do—you’re going to be hard-pressed when you lose your job.” Note the use of the word ‘when’ but not ‘if’. In short, “checking out” is an option fraught with danger.
(30 October 2016): “Small Factories Emerge as a Weapon in the Fight Against Poverty” (http://www.nytimes.com/2016/10/30/business/small-factories-emerge-as-a-weapon-in-the-fight- against-poverty.html)
------Located in Baltimore, Maryland, Marlin Steel is “a small maker of specialized metal baskets used by much bigger manufacturers like Ford Motor, Boeing and Merck.” The company is one of “a rare breed: the urban industrial manufacturer. Marlin is a thriving factory in a place that, over the last half-century, factories have fled—first to the South, and later to Asia. That flight haunts the United States perhaps most in its urban areas—especially neighborhoods that once housed the nation’s working class—and helps explain why many African-Americans in particular today live in poverty in metropolises like Baltimore, Detroit, Newark and St. Louis.”
********An enlightening article—the summary above only provides a hint of its many aspects. It is inspirational, telling the story of one Marlin employee (James Branch) who went from selling drugs and doing time to a life remade through hard work, education, and a good job. It is concerning, indicating that smaller businesses sometimes do not have access to opportunities that larger businesses take for granted. And it is thought provoking, making one reflect on the identity dimensions of making something with one’s own hands. Regarding the last point, I had never thought about the difference one might experience making something that lasts, i.e., is durable (a good) as opposed to something that doesn’t last, i.e., is not durable (a service). I can certainly see that it might matter to many people. No doubt it is a factor in the demand and supply of labor that could use some more attention.
(31 October 2016): “No One Saw Tesla’s Solar Roof Coming” (https://www.bloomberg.com/news/articles/2016-10-31/no-one-saw-tesla-s-solar-roof-coming)
------On Friday evening at Universal Studios in Los Angeles, Elon Musk presented the “grand unification” of his “clean-energy ambitions.” The audience “was able to step into a future powered entirely by Tesla: a house topped with sculpted Tuscan solar tiles, where night-time electricity is stored in two sleek wall-hung Powerwall batteries, and where a Model 3 prototype electric car sits parked out front within reach of the home’s car charger.” With the introduction of solar roofs and a higher- capacity (and cheaper) Powerwall battery, Musk’s pursuit of SolarCity is now easier to understand. As Musk said, “The future is going to overwhelmingly be solar plus battery . . . They go together like peanut butter and jelly.”
********The article includes a three-minute video, which captures the essence of the story and shows the complete line of products: roofs, Powerwall, and a car or two. I would imagine that this new development, although not entirely unforeseen, will make established (incumbent) electric companies a bit more concerned. It has now become easier for some potential customers to become electricity 119
producers, too. In relation to this, I wonder: “To what extent will small-scale electricity producers increase their use of electricity?”
********It is one thing, as in the U.S., to supplement an existing grid with solar-generated electricity, but the situation in much of Africa is quite different: there is no existing grid. In the absence of such a grid, solar power is leap-frogging (in some areas) the grid altogether. A brief examination of that topic is provided by “Off-grid solar power: Africa unplugged” (http://www.economist.com/news/middle- east-and-africa/21709297-small-scale-solar-power-surging-ahead-africa-unplugged). The situation is like that of mobile phones. Many Africans have completely skipped the use of land lines and moved directly to mobile phones. In this development path, it seems that the role of regulation, i.e., the invisible foot, would be reduced.
(1 November 2016): “Selling Air (a.k.a. the Idea They Thought of Next)” (http://www.nytimes.com/2016/11/01/world/what-in-the-world/china-bottled-air-pollution.html)
------“Would you pay $100 for a whiff of Welsh air? In some of the world’s most polluted cities, people apparently will: Sales of bottled air from fresh-smelling places are taking off. . . . Bottled air is one of the least practical but most talked-about ideas. It can hardly replace the local atmosphere . . . But residents in smoggy places are snapping up the stuff anyway. The Australian bottler, Green and Clean, plans to ship about 40,000 containers a month to China starting in December, and then expand to India, Malaysia, Chile and the Middle East.”
********One of those “I can’t believe it has come to this” things. It did make me remember, though, a relatively distant story on the sale of “hits” of oxygen in Tokyo. I don’t think I read this specific article (http://abcnews.go.com/International/story?id=1999240&page=1) from 2006, but it is enough to indicate that the idea of selling bottled air to public has been around for a while. Evidently this isn’t an issue just for urban professionals with a lot of money to spend conspicuously, as reported by The Washington Post in “1 in 7 children lives with ‘toxic’ air, study finds” (https://www.washingtonpost.com/news/energy-environment/wp/2016/10/31/one-in-seven-children- globally-lives-with-toxic-air-study-finds/?utm_term=.4162072a937b). Breathing clean air is an issue, it seems, is a global issue.
(1 November 2016): “A Waterfight Like No Other May Be Brewing Over Asia’s Rivers” (http://www.bloomberg.com/news/features/2016-11-01/a-waterfight-like-no-other-may-be-brewing- over-asia-s-rivers)
------“On Oct. 1, China said a hydropower project in Tibet was diverting water from a tributary of the Brahmaputra River, which flows into India and Bangladesh, reigniting concern over China’s control of some of the region’s biggest waterways that have provided irrigation, transport and life for millennia to much of South and Southeast Asia. India, which fought a war with China in 1962 over a disputed border, is concerned that Beijing could use water as a strategic weapon. Six of Asia’s 10 biggest rivers originate in China, including the Brahmaputra.” 120
********It is interesting, but not surprising, to see that access to both water and air are increasingly problematic. Presumably population and economic growth are behind both developments.
(2 November 2016): “The Social Responsibility of American Industrialists” (http://daily.jstor.org/the- social-responsibility-of-american-industrialists/)
------“In an effort to improve its reputation, Walmart recently ran an ad campaign in which CEO Doug McMillon spoke about the company’s commitment to its workers. Companies have always been concerned with appearing to do the right thing—and, perhaps, with really doing it. In a 1998 paper, John H. Hamer examined what social responsibility looked like to the American industrialists in the nineteenth century. . . . Hamer suggests that these men were motivated not just by public relations concerns but also by their own moral codes. . . . Today, the growth of global, publicly financed companies has further rationalized the business world. It’s up to consumers to decide whether or not efforts like Walmart’s are cynical public relations ploys or genuine attempts to do what is right.”
********The post is based upon “Money and the Moral Order in Late Nineteenth and Early Twentieth-Century American Capitalism,” by John H. Hamer. Hamer examines thirteen capitalists and a link to the article can be found at the bottom of the post. The appearance of this post was serendipitous for me. Presently I am reading Last Call: The Rise and Fall of Prohibition (https://www.amazon.com/Last-Call-Rise-Fall-Prohibition/dp/074327704X/), by Daniel Okrent, which I am finding to be readable and informative. My interest in the book stems from the unusual, perhaps unique, situation of alcohol producers in the U.S. having once produced a legal good which was outlawed and then made legal again. Fifty pages into the book I am seeing, once more, the determined action of market incumbents confronting those who would do away with their businesses. Having recently read The Cigarette Century, though, it seems that the Anti-Saloon League (ASL) and a variety of other “dry” advocates were more effective than those who sought to bring down the tobacco industry. Especially noteworthy, I think, and relevant to this article and the invisible forces generally, is the linkage of the ASL, the brewing industry, large corporations, and the onset of Worker’s Compensation laws. On pages 51-52 of Okrent’s book, it is noted that the passage of Worker’s Compensation laws, resulting from a partnership of Progressives and the ASL. Their passage in many states “placed the burden of proof on the employer instead of the employee,” which turned out to be “a catastrophe for the beer industry. U.S. Steel, Pittsburgh Steel, and other industrials giants” declared “against the saloon.” Some, “like the Diamond Watch Company, announced they would fire any worker knowns to drink ‘intoxicating liquors.’” The result was a knot of “unlikely alliances, conflicting motives, and disingenuous arguments that a three-cushion shot (progressives to ASL to industrialists) around an issue like worker’s compensation didn’t seem odd at all.”
********In all of the above there is a certain flexibility of perspective that recalls the expression “When in Rome, do as the Romans do,” which is nicely elucidated at: http://www.italiannotebook.com/local-interest/origin-do-as-romans-do/. A modern variant is due to Jay Gould of the Erie Railroad, who is reputed to have said that “he was a Republican when he was in 121
Republican districts, a Democrat when he was in Democratic districts, but that he was always for the Erie Railroad.” Something to ponder.
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[The Invisible Forces Weekly: Economics with a Broader View] 290 (9 November 2016)
(28 October 2016): “Americans Are Dying Faster. Millennials, Too” (http://www.bloomberg.com/news/articles/2016-10-28/americans-are-dying-faster-millennials-too)
********This is a longer version of a short article that appeared in the Bloomberg Businessweek of 7- 13 November 2016. To me, its primary interest lies in the link that it provides to a longevity illustrator: http://www.longevityillustrator.org/. The illustrator is easy to use and has the valuable feature of considering one’s partner, too. Given four inputs for each person, one can identify a range of probabilities for living together, as well as for each person individually. Such knowledge is increasingly important employers shift “from traditional pensions . . . to individual 401(k) accounts” that require workers to “figure out retirement on their own.” The Social Security Administration also provide a life expectancy calculator (https://www.ssa.gov/oact/population/longevity.html), although it yields one single number (an average) rather than a range of probabilities.
(3 November 2016): “Start-Ups for the End of Life” (http://www.nytimes.com/2016/11/03/business/start-ups-for-the-end-of-life.html)
------“Death and dying can be costly, but they are rarely considered a business by consumers. . . . But as our population ages and the industry gets more attention, new firms—many of them technology companies—are setting out to compete on price and convenience.” According to Dan Isard, the president of a financial management company that specializes in funeral and cemetery professionals, the “$18 billion funeral industry has long been a technology holdout.” However, “with nearly 2.6 million people dying annually in the United States, entrepreneurs see an opportunity to innovate.” Included in the opportunities they see are such things creating “estate planning documents” like wills, powers of attorney, and health care directives. Eliam Medina of the startup Willing, “If you look at what TurboTax has done for tax planning, we wanted to do the same thing for estate planning.”
********The article briefly describes a few of the growing number of firms seeking to make preparation for death and dealing with death a bit easier. As the articles notes, “Possibly the most difficult situation consumers face is to decide how to be cared for at the end of their lives, and communicating that to family members.” ‘
******** Even those currently in the funeral industry are rethinking what they do. Driving this is a public that is moving toward cremations and away from the traditional casket. This is explored at some length in “Funeral Industry Seeks Ways to Stay Relevant” (http://www.wsj.com/articles/funeral- industry-seeks-ways-to-stay-relevant-1478178000). As Thomas Ryan, the CEO of Service Corp. International, which is the largest operator of U.S. funeral homes, notes: “This [funeral] industry was really built around selling a casket . . . Now it’s really about remembering the person.” The growth of cremation and some practices surrounding it have led the Catholic Church to provide clarification for its adherents. This is summarized in “Vatican issues guidelines on cremation, says no to scattering ashes” (http://www.cnn.com/2016/10/25/europe/cremation-vatican-scattering/). The two-minute video 123
accompanying the article provides a good overview, even providing a bit of theology underpinning the guidelines.
********The WSJ article observes, “As baby boomers age, the number of deaths in the U.S. is projected to rise to about 3.6 million from 2.7 million this year.” So, the overall demand for caskets will depend on the number of deaths each year and the percentage of people choosing caskets in contrast to cremation or alternative expressions such as green burials. Behind those two elements lay cultural factors captured by the invisible handshake and economic factors captured by the invisible hand. This seems like an instance where legal and political forces play a smaller role, although there may well be prohibitions against green burials in various locales.
(3 November 2016): “The Postwar Boom Isn’t Combing Back Anytime Soon” (http://www.bloomberg.com/news/articles/2016-11-03/the-postwar-boom-isn-t-coming-back-anytime- soon)
------[A review of An Extraordinary Time: The End of the Postwar Boom and the Return of the Ordinary Economy (https://www.amazon.com/Extraordinary-Time-Postwar-Ordinary- Economy/dp/0465061982/), by Marc Levinson.] In his latest book, “economist and journalist Marc Levinson says the good times are over for good, or at least for the foreseeable future. The boom from 1948 to ’73 was extraordinary. What we have now, subtitle asserts, is ‘the return of the ordinary economy.’” Although Levinson has a doctorate in economics, “he has a journalist’s appreciation for the power of on-the-ground observation. . . . His authorial technique is to tell a big story by telling a small one.” His previous books were “about an object (The Box: How the Shipping Container Made the World Smaller and the World Economy Bigger) and a company (The Great A&P and the Struggle for Small Business in America); this time he’s focused on a period, and within that a year, and within that a day: Nov. 4, 1973.”
********The Box was a delightful book and I’m looking forward to reading An Extraordinary Time. I appreciated the perspective the reviewer provided into Levinson’s authorial technique. It is an approach I have frequently noticed in newspaper articles and often used to great effect by politicians. I am reminded of the expression “Make big things small.” Although I know it from large-scale projects, I suspect it is also applicable to storytelling.
(3 November 2016): “What Happens When the Most Important Pipeline in the U.S. Explodes” (http://www.bloomberg.com/news/articles/2016-11-03/what-happens-when-the-most-important- pipeline-in-the-u-s-explodes)
------“On Monday, a construction crew in Alabama triggered a massive explosion when a track-hoe struck the biggest fuel pipeline in the U.S. The blast killed one person, injured several, and sparked a wildfire that burned for nearly a day across 31 acres. It also stopped the flow of millions of gallons of gasoline that move up the East Coast each day, from refineries in Houston to tanks in Linden, N.J., outside New York Harbor. The 5,500-mile Colonial Pipeline delivers about half of the refined 124
products used on the East Coast. It consists of two lines—one that carries gasoline, the other that carries distillate fuels such as diesel and jet fuel.” Although the U.S. has lots of gasoline in storage, “All that supply does you absolutely no good if you can’t move it around,” a point made by senior market analyst Phil Flynn of Chicago’s Price Futures Group. The ability to move petroleum products at times such as this is subject to an “obscure maritime law called the Jones Act [that] requires that only U.S.-made, U.S.-flagged ships can deliver goods between ports.”
********The article provides some perspective on all of the behind-the-scenes activity that takes place during a pipeline disruption. Since North Carolina is one of the states that has been affected by the two recent events on the Colonial Pipeline, this article seemed especially relevant. So, although the East Coast is highly dependent on one pipeline for half of its refined products, other transportation modes would be available if necessary, albeit at higher cost.
(5 November 2016): “A Criminal Trait in the Refusal to Wait?” [SR](http://www.wsj.com/articles/a- criminal-trait-in-the-refusal-to-wait-1478107218)
------What type of “questionable conduct early in life reliably predicts criminality? One answer, as a recent research paper shows, is heavy ‘time discounting’—that is, the tendency to value something less if you have to wait for it.” The paper, published in May by David Åkerlund and others looked at a 1966 survey in which “more than 13,000 13-year-olds from Stockholm answered a survey that included a question about time-discounting . . . Based on their answers, about 6% of the teenagers qualified as the steepest time discounters, with the strongest for immediate reward. As it turned out, the individuals who found distant rewards less rewarding also seemed to find distant threats of punishment less deterring: Over the next 18 years, these youths were the subjects most likely to commit criminal acts.” So, “Time discounting now joins another well-recognized childhood predictor of adult antisocial behavior: lack of self-control.”
********The author of this weekly column, Robert Sapolsky, is a neuroendocrinologist at Stanford University (https://en.wikipedia.org/wiki/Robert_Sapolsky). He has packed a lot into a short column which is not readily available. What especially caught my attention was a point he made about predicting violent crime vs. property crime. He notes: “The literature has generally shown that poor childhood self-control is a predictor of later violent crime—when that inner voice saying, ‘You will regret this’ is swamped by an urge to strike a blow or use a gun. In contrast, the Swedish findings show that steep time discounting is a predictor of later property crime, where the immediate enjoyment of purloined goods outweighs the delayed cost in fines or lost freedom.” Sapolsky makes a cautionary note about this: “I should stress that these relationships are statistical, ‘on the average,’ with plenty of individual exceptions.” Looking at the terms ‘self control’ and ‘time discounting’, I wonder how the two are differentiated. 125
********The Swedish article mentioned is “Time discounting and criminal behavior.” You can read an Abstract, as well as download the full paper (with supporting information) at: http://www.pnas.org/content/113/22/6160.abstract.
(6 November 2016): “Who Wins if California Voters Tax E-Cigarettes?” (http://www.nytimes.com/2016/11/07/business/debate-over-risk-of-e-cigarettes-plays-out-on- california-ballot.html)
------Proposition 56 in California is a “ballot measure on taxes for tobacco products. The measure, which would add $2 to packs of cigarettes, is up for a vote on Tuesday. In addition to placing higher taxes on cigarettes, the measure would tax electronic cigarettes just like other tobacco products for the first time. The measure is a potential boon for state coffers but is also considered a major threat by the tobacco industry, which relies increasingly on its e-cigarette business.” In California, unsurprisingly, the battle has been expensive: “R.J. Reynolds Tobacco and Phillip Morris, both of which have their own e-cigarette units, have spent more than $70 million collectively on ads, mailers and other efforts to defeat the ballot measure.” The group seeking to approve 56, which includes a variety of health care organizations, “has raised more than $30 million.” The new taxes could help make up for some of “the revenue lost as cigarette sales have fallen.” In 2005 such revenues exceeded $1 billion but only $750 million was collected last year.
********According to Erika Sward, the assistant vice president for national advocacy at the American Lung Association, “The ‘standard mantra’ on cigarette taxes . . . is that every 10 percent increase yields a 3 to 4 percent decline in smoking among adults, and a 7 percent decline among young people.” This is a nice application of the concept of price elasticity of demand. Presumably young people have lower income and are likely to be less dependent upon nicotine, both of which would make for a larger response to an increase in the tax on cigarettes. Both “elasticities” suggest that tax revenues will increase if the Proposition passes.
********Although an increase in an excise tax, even one of $2 a pack, is not prohibition, it does remind me of some statements in the history of prohibition that I am now reading: The Last Call, by Daniel Okrent. In relation to the Hobson Amendment, a precursor of the eventual 18th (Prohibition) Amendment to the Constitution, William Howard Taft noted that its effect would be that “The business of manufacturing alcohol, liquor and beer will go out of the hands of law-abiding members of the community, and will be transferred to the quasi criminal class” (p. 108). He made this statement while “serving as a professor of law at Yale during the interval between his presidency and his eventual appointment as Chief Justice of the Supreme Court.” According to Wikipedia (https://en.wikipedia.org/wiki/William_Howard_Taft), Taft is the only person to have served as the President of the United States and the Chief Justice of the Supreme Court. Surely he had a rare opportunity to see the invisible forces in action. Regarding Taft (and Theodore Roosevelt), historian Doris Kearns Goodwin has written the well-regarded book The Bully Pulpit: Theodore Roosevelt, William Howard Taft, and the Golden Age of Journalism (https://www.amazon.com/Bully-Pulpit- 126
Theodore-Roosevelt-Journalism/dp/1416547878/). While the story is told “through the intense friendship of Theodore Roosevelt and William Howard Taft . . . The Bully Pulpit is also the story of the muckraking press . . . The muckrakers are portrayed through the greatest group of journalists ever assembled at one magazine.”
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[The Invisible Forces Weekly: Economics with a Broader View] 291 (16 November 2016)
(13 November 2016): “Teslas in the Trailer Park: A California City Faces Its Housing Squeeze” (http://www.nytimes.com/2016/11/14/business/mountain-view-california-confronts-housing- crisis.html)
------“If there is anything that just about every Californian agrees with, it is that it costs too much to live in the state. . . . The town of Mountain View, Google’s home, wants to do something about that. . . . Mountain View is looking to increase its housing stock by as much as 50 percent—including as many as 10,000 units in the area around Google’s main campus.” The current shortages, in Mountain View and elsewhere in the state, stem from cities and suburbs “dominated by anti-growth politics that seek to maximize the construction of tax-generating offices while minimizing the number of budget-depleting residents.” Thus, “the crux of the state’s housing crisis is clear: Everyone knows housing costs are unsustainable and unfair, and that they pose a threat to the state’s economy. Yet every city seems to be counting on its neighbors to step up and fix it.” As a result, people like Rebecca an Steven Callister, “a couple in their late 20s . . . live in a double-wide trailer in a Mountain View mobile home park.” An engineer at LinkedIn, Mr. Callister would typically own a home. “But given the cost of housing in Mountain View and the brutal commute times from anywhere they could afford, a trailer makes the most sense and lets him spend more time with the couple’s two young children.” Mrs. Callister jokes “that it’s the only mobile home park with Mercedeses and Teslas in the driveway . . . It’s like the new middle class in California.”
------In the wake of recent elections, the City Council of Mountain View “is studying how to add a total of 17,000 [housing] units.” To process the requests to build them, councilman Lenny Siegel notes that the city is seeking to hire additional planners, but few want the jobs because prospective planners “can’t afford to live here.”
********The article provides an excellent overview of some of the many considerations involved in expanding the housing stock of a city. In brief, cities seem to be more interested in the revenues generated by offices than the costs generated by residents.
(13 November 2016): “Legal-Weed Crowd’s Euphoria Fades Because of Trump Concerns” (http://www.bloomberg.com/news/articles/2016-11-13/legal-weed-crowd-s-election-night-euphoria- turns-wary-on-trump)
------“The legal-weed industry that celebrated victories in eight states last week is now warily eyeing the coming Trump administration. . . . While President-elect Donald Trump has sent mixed signals, many in his inner circle are no fans of legalization. The next U.S. Justice Department could easily ditch the noninterference policy in force since 2013. Pot is illegal under federal law.”
********As the article notes, in consequence of the recent election “One-in-five adults will be living in legal-weed states by the time Trump is inaugurated. In 28 states, including four that just voted to 128
join, medicinal marijuana will be lawful.” The evolving status of marijuana in the United States is interesting to compare with the history of Prohibition in the U.S. (I just finished reading the highly readable history Last Call: The Rise and Fall of Prohibition (https://www.amazon.com/Last-Call- Rise-Fall-Prohibition/dp/074327704X/), by Daniel Okrent, and I am looking forward to viewing Prohibition (https://www.amazon.com/Ken-Burns-Prohibition/dp/B004NJC0R0/), by Ken Burns and Lynn Novick. Also of interest is the book Smuggler Nation: How Illicit Trade Made America (https://www.amazon.com/Smuggler-Nation-Illicit-Trade-America/dp/0199360987/), by political scientist Peter Andreas.) It turns out that a great deal of commerce can (and does) thrive when the government averts its eye. Much commerce can, and does, thrive when government averts its watchful eye. But when that watchful eye refocuses and is backed up by determined enforcement, the consequences can be dramatic. In the case of prohibition, a constitutional amendment for repeal. In the case of smuggling, the American Revolution.
(14 November 2016): “Dirty Linen: A Bed Sheets Scandal Hits the Cotton Industry” (http://www.bloomberg.com/news/articles/2016-11-14/dirty-linen-a-bed-sheets-scandal-is-roiling-the- cotton-industry)
------“Huddled inside Target Corp.’s headquarters in downtown Minneapolis, a team of investigators spent the summer trying to answer what should have been a simple question: What were hundreds of thousands of the retailer’s sheets actually made of? What they discovered has undermined trust in a global luxury product and set off a salvo of class-action lawsuits that have created a king-size public relations challenge for the Indian textiles industry and the U.S. companies it supplies. Turns out that major American retailers, including Target and Wal-Mart Stores Inc., have been selling premium- priced sheets purportedly made of Egyptian cotton—a byword for luxury in linens—but that may in reality be woven with lower-quality cotton blends.” Target investigators found that 750,000 of its “Egyptian cotton” sheets, which “sold for as much as $75 a pop, didn’t contain any Egyptian cotton at all, but an amalgam of lower-quality fibers from cheaper sources.” The Cotton Egypt Association certifies Egyptian cotton, “But once a certification is granted, producers are mostly left alone until they need to renew their label a year later.”
********The article points to challenges faced by all certification processes, i.e., it is generally too expensive to have each unit of a product certified, so certification tends to employ methods that are less costly and thereby less likely to provide trustworthy certification. In the present case, Egyptian cotton production has fallen dramatically over the last 10 years, from 970,000 bales in 2006-7 to a projected 160,000 bales in 2016-17. As a result, the monetary gain from representing a lower-quality product as Egyptian cotton has increased. Clearly, consumers are not in a position to do their own testing of such products, despite the adage caveat emptor (https://en.wikipedia.org/wiki/Caveat_emptor). While reading the Wikipedia article, I came across the expression caveat lector, “let the reader beware.” Clearly an expression that should be used more frequently in this “fake news” era. 129
(15 November 2016): “The Invisible Digital Hand” (http://www.wsj.com/articles/the-invisible-digital- hand-1479168252)
------[A review, by Burton G. Malkiel, of Virtual Competition: The Promise an Perils of the Algorithm-Driven Economy [SR](https://www.amazon.com/Virtual-Competition-Promise-Algorithm- Driven-Economy/dp/0674545478/), by Ariel Ezrachi and Maurice E. Stucke.] “We are all aware of the enormous potential benefits to consumers from the use of the internet. . . . But in ‘Virtual Competition,’ Ariel Ezrachi and Maurice E. Stucke, two legal scholars, make a convincing argument that there can be a darker side to the growth of digital commerce. The replacement of the invisible hand of competition by the digitized hand of internet commerce can give rise to anticompetitive behavior that the competition authorities are ill equipped to deal with.” Issues of price fixing and collusion get “murky when the computer algorithms of sellers are designed to learn what others are charging and to change prices in response. Will computers learn to collude? Can the use of artificial intelligence allow computer self-learning to produce the same results as tacit collusion and actually raise prices? The authors present several scenarios whereby computers can cartelize a market by monitoring ‘cheating’ and punishing all defections.”
********As Malkiel notes, “The most controversial issue raised by the book concerns what governmental responses and intervention are appropriate. . . . At the very least we need to ask ourselves if the 20th-century regulatory framework is appropriate for the 21st-century digital economy.” Given that the authors’ arguments are illustrated “with relevant case law as well as references to studies in economics and behavioral psychology,” this seems like a good place to get up to speed on the co-evolution of the invisible hand and the invisible foot in relation to digital competition.
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[The Invisible Forces Weekly: Economics with a Broader View] 292 (23 November 2016)
This was somewhat of a slow week. So much of the media, print and otherwise, has been caught up in speculation about what a Donald Trump administration will be like that it seems like a good deal of more conventional—less speculative—reporting has been crowded out. That being said, both of the following articles touch, directly or indirectly, on matters that are somewhat speculative.
(17 November 2016): “How Republicans Plan to Spend Like Crazy Without Running Up Debt” (http://www.bloomberg.com/news/articles/2016-11-17/how-the-white-house-could-justify-a-debt- driven-keynesian-stimulus)
********This article was titled “John Maynard Trump” in the print version of Bloomberg Businessweek. I prefer the title of the print version as it comes closer to reflecting the content of the article and I appreciate the play on John Maynard Keynes. What the article does, however, is provide a somewhat, perhaps deservedly, jaundiced view of alternative perspectives on macroeconomic modeling, especially regarding whether it should be doing “statically” or “dynamically.” The meaning of both of those terms in developed in the article. As you make your way through it, you will receive a clearer view of some of the assumptions that underlay macroeconomic policymaking and the widely divergent estimates one can generate through their choice. Of course, these assumptions are almost never discussed in media presentations, so read this and get a sense of the immense mass that lies below the surface of (some) public pronouncements.
(19 November 2016): “Globalization: The third wave” (http://www.economist.com/news/books-and- arts/21710240-first-free-movement-goods-then-ideas-momentum-may-stop-free-exchange)
------[A review of The Great Convergence: Information Technology and the New Globalization (https://www.amazon.com/Great-Convergence-Information-Technology- Globalization/dp/067466048X), by Richard Baldwin.] “Mr Baldwin’s grand theory of globalisation is of a series of unbundlings, driven by sequential collapses in the cost of moving things and ideas across space.” In the first, which unbundled production and consumption, “moving goods became cheap” but “until the very end of the 20th century moving ideas was expensive.” Since the 1990s, however, “globalisations has changed radically, as the internet has lifted [i.e., reduced] the cost of moving ideas, and fueled a second unbundling. Now that co-ordinating international production is cheaper, faster and safer, supply chains ignore borders to go sprawling across the world. . . . With many products made everywhere, trade has been, in effect, denationalised.” Yet, there is a third constraint on globalisation beyond things and ideas: labour. Mr Baldwin imagines a future globalisation “unshackled from its third constraint, as labour is made mobile by robots allowing people to offer their services remotely.”
********The reviewer gives a nod to current political realities in the U.S., noting “To placate voters by raising tariffs is to tackle 21-century globalisation with tools better suited to the 20th (or even 19th) century. Given the new world of global supply chains, a tariff is life erecting a wall in the middle of a factory.” It is an image that gives me pause. It does seem that a view of business built upon, i.e., a 131
Smithian pin factory, is at work in the minds of some. Yet the vertical process from production to the ultimate consumer, today, is generally highly distributed, with each production stage likely to be the output of a different producer often in a different country.
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[The Invisible Forces Weekly: Economics with a Broader View] 293 (30 November 2016)
(16 November 2016): “For one condition, the drugs came before the disorder” (http://www.jsonline.com/story/news/investigations/2016/11/16/one-condition-drugs-came-before- disorder/93823042/)
********This article, on the treatment of premenstrual dysphoric disorder (PMDD), appeared in the Asheville Citizen-Times on 24 November 2016. It is one of a series on “Illness Inflation” developed by the Milwaukee Journal-Sentinel and MedPage Today. An overview of the way that “New and expanded medical definitions create more patients—and a lucrative market for drug firms” can be found at: http://archive.jsonline.com/watchdog/watchdogreports/new-and-expanded-medical- definitions-create-more-patients--and-a-lucrative-market-for-drug-firms--379981751.html.
********A complete list of the conditions examined in the “Inflation” series can be found at: http://projects.jsonline.com/topics/illness-inflation/index.html. They include: Adult ADHD, Binge- eating disorder, Female sexual interest/arousal disorder, Intermittent explosive disorder, Low testosterone, Overactive bladder, Pre-diabetes, and PMDD. The conditions are categorized as psychiatric and medical. For me what stands out in the PMDD article is the role that pharmaceutical companies and regulators play in defining a market for a drug. As the link in this paragraph notes, “New definitions or lowered thresholds mean millions more people—overnight—fit the criterial of having treatable disorders.”
********MedPage Today seems to be a source worth remembering. You can learn more about it at: http://www.medpagetoday.com/. Coincidentally, when I went to its page, I found an article dealing with surgeon Tom Price, a member of the House of Representatives who has been nominated to be the next Health and Human Services Secretary. You can learn more about Price’s views in the article “10 Questions: Rep. Tom Price, MD (R-Ga)” (http://www.medpagetoday.com/Surgery/Orthopedics/44217).
(25 November 2016): “Small Businesses Lament There Are Too Few Mexicans in U.S., Not Too Many” [SR](http://www.wsj.com/articles/small-businesses-lament-there-are-too-few-mexicans-in-u-s- not-too-many-1480005020)
------In Dallas, San Francisco, and the state of Florida, employers are losing revenue because of labor shortages. “As hiring accelerates and the labor market tightens thanks to a steady U.S. recovery, employers who need low-skilled workers are increasingly struggling to fill vacancies. One big reason: Mexican workers, who form the backbone of industries like hospitality, construction and agriculture, are in short supply.” According to senior economist Pia Orrenius at the Federal Reserve Bank of Dallas, “Mass migration from Mexico is over . . . Low-skilled labor will never be as plentiful again.” One reason is smaller families. “For the last 20 years, Mexican families have averaged just over two children, compared with nearly seven in the late 1960s.” In addition, “some Mexican states have launched campaigns to discourage youngsters from making the perilous journey north.” Likewise, 133
“smugglers are commanding higher prices to get migrants through territory often controlled by drug gangs and across a far more secure border than ever before.”
********The situation described above would seem to be a boon for low-skilled American workers but, as mentioned in the article, “Employers say U.S.-born workers don’t want those jobs.” As I read through the article, twice, I found it interesting that in 1986 then-President Ronald Reagan “granted amnesty to six million undocumented immigrants.” The article is accompanied by a four-minute video and a small number of charts and photos that add a lot. Then there are the more than 900 comments provided by readers. One especially telling graph shows the number of Mexicans apprehended by the U.S. Border patrol from 1960 to 2014. Apprehensions have fallen from a seeming peak in 2000 of about 1.6 million to a modern low of 250,000 in 2014. One explanation is that enforcement has declined but the explanation more consistent with the drift of the article is that the U.S. has become relatively less attractive (Mexico relatively more attractive). What policy has failed to do, it seems, economic and cultural conditions have done.
********The topics of immigration and smuggling give me a chance to say a word or two about the book I am currently reading, Smuggler Nation: How Illicit Trade Made America (https://www.amazon.com/Smuggler-Nation-Illicit-Trade-America/dp/0199360987), by Peter Andreas. The book is a sustained effort to discuss the various ways that smuggling and related illegal activities have affected the development of the U.S. It is chronologically developed and has a good deal to say about illegal immigration. At the end of chapter 8, which deals with the slave trade, Andreas notes:
The illicit slave trade was not the only (or the numerically most significant) episode of smuggled human cargo in American history . . . As we will see later in our story, millions of foreign workers clandestinely came to America through the back door, but in violation of U.S. immigration laws rather than antislave-trade laws. As cheap immigrant workers came to replace slaves as America’s most exploitable labor force in the late nineteenth century, the federal government became far more involved in immigration control than it had ever been in policing the slave trade.
You can find a time series (1850-2015) of number of immigrants and immigrants as a percentage of the population at: http://www.migrationpolicy.org/programs/data-hub/charts/immigrant-population- over-time.
(26 November 2016): “Brewers Bet Beer Drinkers Seek More Sober Suds” [SR](http://www.wsj.com/articles/brewers-bet-beer-drinkers-seek-more-sober-suds-1479810603)
------“After years of trying and failing to jump-start sales of alcohol-free beer, the world’s largest brewers are expanding their nonalcoholic offerings with renewed zeal. Each of the new global Big Three in brewing—Anheuser-Busch InBev NV, Heineken NV and Carlsberg A/S—is investing in new technology, marketing and distribution for nonalcoholic beers like Budweiser Prohibition Brew, 0.0% MAXX and Nordic. They are betting stricter alcohol regulations and a shift toward healthier 134
consumption will lift sales.” Although the sales of these beers are currently low, “Nonalcoholic beer is growing three times faster than the overall beer market,” according to Carlsberg CEO Cees’t Hart. In addition, “Brewers earn fatter profit margins from nonalcoholic beer given the absence of excise tax and the fact that such beers often sell at a premium to regular beer.” Increases in beverage sales will have to solve a basic problem: “many everyday drinkers aren’t convinced nonalcoholic beers make sense. As noted a former intern who studied the market, “It’s kind of like nonbeneficial exercise— why would people use this if the main benefit doesn’t exist?”
********As a consumer of “NABs” and having read recently about prohibition, this subject is of interest. According to the article, alcohol-free beer can be made “either by halting the conversion of sugars to alcohol early or removing the alcohol after brewing is complete.” Only this second method seems to have been discussed in a recent “Answer Man” column in our local paper: http://www.citizen-times.com/story/news/local/2016/11/07/answer-man-non-alcoholic-craft-beer-mia- mhu-asbestos/93418962/. I suspect that craft brewers will find it difficult to produce at a scale that is profitable given the narrowness of the market but the situation may well be different for the global Big Three.
********The cigarette industry, of course, really knows how to target customers and develop products and advertising in its pursuit. This is again made apparent in “Marlboro Black Lures Millennials Who Shunned Cowboy Image” [SR](http://www.wsj.com/articles/marlboro-black-lures-millennials-who- shunned-cowboy-image-1480329006). In contrast to the tradition Marlboro Red, the lower-priced Black “offers what the company calls a ‘bold, modern take’ on Marlboro—think tattoos, black jeans and motorcycles instead of Stetsons, bluejeans and horses. It is marketed to young adults with direct mail that looks more like a VIP party invitation—black, rimmed with white—than junk mail. In the five years since Marlboro Black was introduced, it has done a lot to help Philip Morris USA with its millennial problem.” This is probably a good time to again draw attention to The Cigarette Century (https://www.amazon.com/Cigarette-Century-Persistence-Product-Defined/dp/0465070485/), by Allan Brandt.
********While we are on the subject of cigarettes, The Atlantic had a very interesting article in its December issue: “How Casinos Enable Gambling Addicts” (http://www.theatlantic.com/magazine/archive/2016/12/losing-it-all/505814/). The story is built around the sad case of Scott Stevens, a gambling addict who eventually committed suicide. The article notes that “one in five gambling addicts attempts suicide—the highest rate among addicts of any kind.” The article is very informative, going into some detail on the various strategies embodied in electronic gaming machines (EGMs) intended to encourage players to gamble longer. Regarding the connection to cigarettes, “Public-policy advocates compare slot machines to cigarettes. Both, they claim, are products specifically and deliberately engineered to have addictive properties that are known to hook users.” The article cites a few books from which one could learn more. Two that caught my attention are Addiction by Design: Machine Gambling in Las Vegas (https://www.amazon.com/Addiction- Design-Machine-Gambling-Vegas/dp/0691160880/), by Natasha Dow Schüll, and Gambling in 135
America: Costs and Benefits (https://www.amazon.com/Gambling-America-Benefits-Earl- Grinols/dp/0521830133/), by Earl L. Grinois. One thing I saw reinforced by the article is how difficult it is to rid a state of a product once it has been taxed, as the government will lose tax revenue once the product disappears. Of course, this has also been a selling point of gambling in North Carolina and other states. Legalize gambling, tax it, and then use tax revenues to support, for example, education. Sometimes it is hard to keep your principles when a pile of money is placed before you.
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[The Invisible Forces Weekly: Economics with a Broader View] 294 (7 December 2016)
(18 November 2016): “Jay W. Forrester Dies at 98; a Pioneer in Computer Models” (http://www.nytimes.com/2016/11/18/technology/jay-forrester-dead.html)
------“Jay W. Forrester, an electrical engineer whose insights into both computing and organizations more than 60 years ago gave rise to a field of computer modeling that examines the behavior of things as specific as a corporation and as broad as global growth, died on Wednesday [November 16] at his home in Concord., Mass. He was 98.” Professor Forrester “was working at the Massachusetts Institute of Technology in the 1950s when he developed the field of system dynamics modeling to help corporations understand the long-term impact of management policies. System dynamics, he once wrote, ‘uses computer simulation to take the knowledge we already have about details in the world around us and to show why our social and physical systems behave the way they do.’ It is now included in many business school curriculums, and simulation modeling has been adopted by other disciplines.”
********Forrester was truly an intellectual giant and a long-lived one. He reminds me in some ways of Nobel laureate Ronald Coase who made a career based upon insights he drew from actually talking with the people involved in the nitty gritty of manufacturing. Alfred Marshall did much the same, albeit at a different (much later) stage of his career, when his Industry and Trade (1919) was published. I first came to learn about Forrester in the early 1970s when I took a course on Economic Dynamics from Richard Day at the University of Wisconsin-Madison. It was my last semester as an undergraduate and Professor Day drew heavily upon The Limits to Growth: A Report for the Club of Rome’s Project on the Predicament of Mankind (1972), which drew heavily from Forrester’s World Dynamics (1971). The book, authored by Donella H. Meadows, Dennis L. Meadows, Jørgen Sanders, and William W. Behrens, III, resulted in a large outpouring critical of its “growth and collapse” simulations, and our class spent some time exploring them. Much will be written about the contributions of Jay W. Forrester in the years to come. You can learn more about system dynamics at: https://en.wikipedia.org/wiki/System_dynamics. A classic, and readable, statement of Forrester’s approach is presented in his 1971 article “Counterintuitive Behavior of Social Systems” (https://ocw.mit.edu/courses/sloan-school-of-management/15-988-system-dynamics-self-study-fall- 1998-spring-1999/readings/behavior.pdf).
(29 November 2016): “Welcome to Capitalism Camp for Kindergartners” (https://www.bloomberg.com/news/features/2016-11-29/welcome-to-capitalism-camp-for- kindergartners)
------Chuchi Arevalo is a “Georgetown MBA and former business consultant” and the founder of Spark Business Academy, which provides offers classes such as the “flagship Future Millionaires Bootcamp, a weeklong, $495 course in budgets, investing, entrepreneurship, business ethics, and leadership.” He offers his courses in Washington, D.C. and its suburbs, where “it’s like the Great 137
Recession never happened. Almost a quarter of D.C. households now earn more than $150,000 a year, compared with 8 percent in 2000. Five of the 10 wealthiest U.S. counties are D.C. suburbs; the city is chockablock with lawyers, government contractors, and consultants. . . . Area schools are notorious pressure cookers, as high-achieving parents push their children to begin their own ascent.” At Spark, children 6-10 and 11-16 are given the opportunity to learn concepts such as the price elasticity of demand and explore IRS Form 1040. “On the last day of camp, Arevalo brought doughnuts and pizza and led one last debate, about the ethics of Mylan’s decision to raise prices sixfold on its lifesaving EpiPen. Or, as he put it in a note to parents, ‘Campers practices stakeholder management by seeking to strike a balance between the company’s duty to increase shareholder value (and profits) and its duty to its customers.’”
********The article reminds me a lot of the A-Hed pieces of The Wall Street Journal. Although its title does seem to exaggerate the clientele of the camp, reading the article was eye opening. I have mixed thoughts and emotions about this development, but I thought it was interesting enough as, perhaps, an instance of the invisible handshake—social an historical forces that influence human behavior.
********This article reminded me of one I recently read in The Chronicle of Higher Education: “What Was Conservatism?” Its author is Jennifer Burns, who is an associate professor of history at Stanford University. What made the connection was her prior authorship—I haven’t read it—of Goddess of the Market: Ayn Rand and the American Right (https://www.amazon.com/Goddess- Market-Rand-American-Right/dp/0195324870/). I read a bit of the “Essay on Sources” in the back of the book and if Burns is to be believed, and I am willing to believe, many (most?) treatments of Rand’s left have been based on edited, and in some cases rewritten, texts rather than her actual words. Learning more about Ayn Rand will likely be valuable as her ideas, or approximations thereof, begin to have more influence in federal politics during the next four years.
(2 December 2016): “Boycotts. Backlash. Breitbart: U.S. companies confront a volatile political climate” (http://wpo.st/E9FJ2)
------“Froot Loops and Frosted Flakes aren’t normally the kind of brands to get caught in the political crosshairs.” But when “Kellogg said this week it would pull advertising from Breitbart News, the far- right web site that its critics say trades in racist and sexist content. In response, Breitbart called on readers to boycott the company, devoted a chunk of its front page to stories about Kellogg or the boycott, and sparked a social media outcry. Consumers on both the right and the left piled in, saying they would either stop buying the company’s products—or conversely, stock up on them. . . . In the weeks since the election, companies have navigated a sharply politicized environment, one that has entailed calls for boycotts, explosive social media responses to executive comments and thorny interactions between front-line workers and their customers” 138
********Although the occasion of the article is the pulling of Kellogg’s advertising from Breitbart, what struck me was the opportunity that a media company has for affecting demand, in this case the demand for the Kellogg products if not the demand for advertising on Breitbart’s site. This reminds me of the expression, usually attributed to Gandhi, “An eye for an eye makes the whole world blind.” Not surprisingly, the source of the expression is more complex and interesting (http://quoteinvestigator.com/2010/12/27/eye-for-eye-blind/). The Kellogg case indicates the importance of reputation management as well as the necessity for careful investigation of the advertising spots. If a company simply seeks to “follow the eyeballs,” its products might well end up at places contrary to the values it espouses. You can learn more about how about eyeball-following ad placement at: http://www.wsj.com/articles/breitbart-controversy-spotlights-ad-technology-confusion- 1480737178.
(3 December 2016): “Too Many Railcars, Too Little Freight” [SR](http://www.wsj.com/articles/too- many-railcars-too-little-freight-1480690819)
------“Light traffic on North American railroads has sidetracked the railcar market. Railcar manufacturers, financiers and equipment-leasing companies feasted on high demand to move coal, oil and other commodities from 2012 until last year. Then commodity prices crashed and output slumped.” As a result, “A fifth of the continent’s 1.6 million railcars are parked in storage yards or along lonesome stretches of rural track. A quarter fewer new cars were delivered in the first nine months of 2016 compared with a year earlier. Lease rates for some cars have fallen by more than half.” And the length of leases has fallen: “Railcar leases have shrunk to as short as a year from six to eight years a couple of years ago, railcar-market analysts said. Owners are willing to lease out cars for less time at lower rates to make whatever money they can.”
********As the article comments, “Like other [durable] equipment markets, the railcar business is susceptible to booms and busts.” One thing I noticed was that there was no mention of employing salvage operations for “redundant” railcars. Cutting up ships and selling what remains is frequently practiced. Does this not happen for railcars or was it something not mentioned by the reporter? My quick look at the Internet revealed a meaningful number of railcar salvage yards. It could be that there is no aggregate information about their activities.
(3 December 2016): “A History of Classical Music (The Women-Only Version” (http://www.nytimes.com/interactive/2016/12/02/arts/music/01womencomposers.html)
------“This month at the Metropolitan Opera, audiences can see and hear, for the first time there in over a century, an opera composed by a woman—Kaija Saariaho’s ‘L’Amour de Loin.’ The milestone is shocking—and it can be explained, if not fully justified. A composer with a desire for an audience has to be in possession of skills that have, on their surface, very little to do with music. He (it was almost always a he) needs to be capable of self-promotion, of fund-raising, of a kind of confidence that makes others follow instructions. Arguably, it’s these adjacent abilities that have been least 139
encouraged in female composers. Then there is the notion, intractable for centuries, that women could perhaps be talented of body—with nimble fingers and a bell-lie voice—but never of mind, which is, of course, where composition originates.” American composer Ashley Fure, who has assembled and presented statistics on the participation of women in the various events and performances at the International Ferienkurse fur Neue Musik at Darmstadt, Germany in August 2016, notes that in music, like success in architecture and high cuisine, “Talent isn’t enough.” There is “A vast an complicated matrix of financing, promotion and patronage” that presents ‘many opportunities for the pressures and incongruities of culture to impact the dissemination an development of work.’”
********This is one of the clearer examples of the role of social and historical forces, i.e., the invisible handshake, in affecting human behavior. The article largely proceeds by examining a sampling of women composers, accompanied by recordings of one of their works. I listened to them all and the piece by Barbara Strozzi (1650s) stood out for me, as did the one by Louise Farrenc (1850). “The March of Women,” by Ethel Smyth (1912) is especially relevant to the article. Finally, Ashley Fure’s “Something to Hunt” provides some exposure to New Music. You can learn more about Fure’s work, women in music, and the International Ferienkurse by following suggestive links at: https://soundcloud.com/gender-research-darmstadt. One of the things you could ultimately find is the almost two-hour panel organized by Fure at Darmstadt (https://soundcloud.com/gender-research- darmstadt).
********So, yes, culture does matter and can limit, as well as enable. With regard to the latter, there is review of economic historian Joel Mokyr’s new book A Culture of Growth: The Origins of the Modern Economy (http://www.economist.com/news/books-and-arts/21711023-new-history-puts- principle-contestability-heart-story). In developing the importance of culture in relation to the divergent growth of Western societies, “Mr Mokyr speaks of ‘a market for ideas’, a system in which people ‘try to persuade an audience of the correctness of their beliefs’.” In Europe, it is argued, “an arrangement whereby the ‘market for ideas’ flourished.” The source of that flourishing was “The Royal Society, a club for scientific exchange founded in London in 1660, [that] started a journal in which everyone from Christopher Wren to Robert Boyle battled over ideas. . . . A translational community known as the ‘Republic of Letters’ sprang up.” You can learn more about Mokyr’s book at: https://www.amazon.com/dp/0691168881.
********One more variation on the culture theme is provided by “An Incubator for (Former) Drug Dealers” (https://www.bloomberg.com/news/features/2016-11-29/an-incubator-for-former-drug- dealers). As former prison inmate Bashuan Brown notes, those who hustle drugs “are entrepreneurs denied opportunity.”
(4 December 2016): “From Michael Lewis, a Portrait of the Men Who Shaped ‘Moneyball’” (http://www.nytimes.com/2016/12/03/business/media/from-michael-lewis-a-portrait-of-the-men-who- shaped-moneyball.html) 140
********The latest book of prolific author Michael Lewis, The Undoing Project: A Friendship That Changed Our Minds (https://www.amazon.com/Undoing-Project-Friendship-Changed- Minds/dp/0393254593/) will be released on December 6th. In it he relates the collaboration and friendship of two psychologists who made lasting contributions to economics: Daniel Kahneman and Amos Tversky; Kahneman received the Nobel prize in economics in 2002 (http://www.nobelprize.org/nobel_prizes/economic-sciences/laureates/2002/). The book was reviewed earlier at: http://www.nytimes.com/2016/12/01/books/review-michael-lewis-on-two-well-matched-but- finally-mismatched-men.html. This book adds to the growing library of biographically-oriented books by those who have contributed to the emergence and growth of behavioral economics. One book that comes immediately to mind is Misbehaving: The Making of Behavioral Economics (https://www.amazon.com/Misbehaving-Behavioral-Economics-Richard-Thaler/dp/039335279X/), by Richard H. Thaler.
(7 December 2016): “Forget Robots—People Skills Are the Future of American Jobs” (https://www.bloomberg.com/news/articles/2016-12-07/forget-robots-jobs-requiring-people-skills-are- the-future-of-american-labor)
------“Automation may be gutting American manufacturing jobs, but there’s one thing the robots still can’t beat us at: people skills. It just so happens that the future of American labor will require a lot of them. The occupations projected to a the most jobs in the next 10 years, according to the Bureau of Labor Statistics—like home health aides, registered nurses, and retail and service workers. Yet the jobs the president-elect has focused on reviving—mostly in manufacturing dominated by men—are the ones most vulnerable to being replaced by robots, not the ones that are in highest demand or expected to grow the fastest.” So, it is thought that “The future of American labor lies in jobs that require empathy and critical thinking.” Although jobs that require social skills are of growing importance, according to the National Bureau of Economic Research, many “empathy jobs pay a lot less than factory work.” Historically, “Fields dominated by women tend to pay less.” If more men enter empathy-requiring fields, pay me go up. For now, “Those so-called feminized jobs . . . are the ones the robots . . . can’t take from us.”
********The article contains links to some valuable sources, including one to the NBER paper is “The Growing Importance of Social Skills in the Labor Force” (http://papers.nber.org/tmp/43408- w21473.pdf), by David J. Deming. A statement by Ravin Jesuthasan, of the HR consulting firm Willis Towers Watson, struck me as a nice summary of current past and prospective job changes: “Anything that has a routine to it can be automated . . . Artificial intelligence is doing to white-collar jobs what robotics has long been doing to blue-collar jobs.”
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[The Invisible Forces Weekly: Economics with a Broader View] 295 (14 December 2016)
(9 December 2016): “Sears Transformed America. It Deserves to Die With Dignity.” (https://www.bloomberg.com/view/articles/2016-12-09/sears-deserves-to-die-with-dignity)
------“Listening to a Sears earnings call in 2016 is like realizing that the twinkling light you’re admiring in the night sky is from a star that died 50 years ago. Sears Holdings Corp. lost $748 million last quarter amid falling sales, an even worse performance than the dismal losses of the period a year earlier. There is no obvious reason that the business might improve. And yet executives are still discussing how important its shopper loyalty program is ‘to the future and growth of the company,’ as if the company were going to have growth, and shoppers and a future.”
********The author of this column is Megan McArdle, who has written on a wide variety of topics for Bloomberg. You can see that variety at: https://www.bloomberg.com/view/contributors/AQjVOcPejrY/megan-mcardle. As someone who occasionally goes to K-Mart but almost never goes to Sears—both decisions are location driven—here emphasis on the role of location for Sears financial woes rang true, although there have certainly been other factors at work. McArdle notes that Sears twice revolutionized American retail, once through its catalogs and once through its anchoring of malls. But the future of Sears isn’t bright. The rise and fall of another iconic American firm is related in Marc Levinson’s The Great A&P and the Struggle for Small Business in America (https://www.amazon.com/gp/product/0809051435/).
********Businesses like Sears might be able to extend to extend their life by adopting the so-called “dark store loophole” to lower their property taxes, an approach that is now being used by firms such as Lowes, Target, and Walmart (https://www.bloomberg.com/news/articles/2016-12-08/how-big-box- retailers-weaponize-old-stores). Growing out of a court ruling in Detroit, Michigan, the “dark store” approach is being used in Marquette, Michigan by Walmart to argue that the tax value of a “bustling store should be assigned about the same value for tax purposes as one that’s been vacant for years, hundreds of miles away. . . . The dark store tax argument has been gaining use since a Michigan court accepted it in 2010. . . . Two-thirds of Michigan’s counties have lost more than $75 million in property taxes since 2012 as a result of the ruling.” The article is accompanied by a five-minute that makes many of the same points.
(9 December 2016): “How ‘Islands of Honesty’ Can Crush a System of Corruption” (http://www.nytimes.com/2016/12/09/world/asia/south-korea-brazil-argentina-impeachment.html)
------“For over a year, a global mystery has been growing: Why are so many governments around the world collapsing amid corruption scandals?” Whether it be South Korea, Brazil, South Africa, Guatemala, or Argentina, “the story is familiar: a corruption scandal rocks a nation, reaching the highest levels of government and provoking a political crisis.” Professor of behavioral economics Raymond Fisman of Boston University claims that a focus on individual wrongdoing in these cases is misleading, finding it more useful to focus on systemic corruption. He noted that “Once systemic 142
corruption takes hold . . . it can quickly infect an entire system, encouraging or even forcing bad behavior—even by those who would, in another context, remain honest.” Fisman argues that “the most accurate way to think of corruption is as an ‘equilibrium’—the result of people acting rationally within a flawed system, not just individual moral lapses. . . . “if most people are honest . . . paying a bribe is a risky endeavor. . . . But ‘if everyone around you is paying bribes, the cost-benefit tradeoff flips’ As more and more people engage in corruption, you’re better able to find willing partners in crime. And the benefits of staying honest decline.”
********The article provides an excellent example of economic reasoning as it relates to the relevance of culture on human behavior—the invisible handshake—and how culture might change under certain circumstances. Fisman and UCLA political scientist Miriam Golden have written about corruption in their forthcoming (April 2017) book Corruption: What Everyone Needs to Know, which you can learn more about at: https://global.oup.com/academic/product/corruption-9780190463984. The notion of “islands of honesty” is due to political scientist Christoph Stefes, of the University of Colorado. He notes that it is possible to disrupt a corrupt equilibrium through such islands, noting that the although investigations into corruption originating from them cannot eradicate corruption on their own, “they certainly can make a difference as soon as they start spreading, especially when they can connect with civil society.” All this reminds me of the justly famous book The Evolution of Cooperation (https://www.amazon.com/Evolution-Cooperation-Revised-Robert-Axelrod/dp/0465005640/), by Robert Axelrod. It seems like Stefes is arguing toward something like the evolution of trust, maybe even the evolution of morality. The concept of ‘islands of honesty’ appeared in the 2006 book Understanding Post-Soviet Transitions: Corruption, Collusion and Clientelism (https://www.amazon.com/Understanding-Post-Soviet-Transitions-Corruption- Clientelism/dp/1403936587/).
********The above reminded me of the recent book by Samuel Bowles, The Moral Economy: Why Good Incentives Are No Substitute for Good Citizens (https://www.amazon.com/Moral-Economy- Incentives-Substitute-Citizens/dp/0300163800/). It is on the top of my next-to-read list. One can change incentives quickly, of course, but over the long haul it is the character of the people matters fundamentally. Perhaps Bowles provides a guide, of sorts, to nurturing the formation of islands of morality and facilitating their spread.
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[The Invisible Forces Weekly: Economics with a Broader View] 296 (21 December 2016)
(14 December 2016): “The Great A.I. Awakening” (http://www.nytimes.com/2016/12/14/magazine/the-great-ai-awakening.html)
********This is a very lengthy—39 pages in pdf—article that is very well written, interesting, and important. Its summary, below the article title, is “How Google used artificial intelligence to transform Google Translate, one of its more popular services—and how machine learning is poised to reinvent computing itself.” The article uses the transformation of Google Translate as the occasion to accessibly dilate on the recent history of artificial intelligence. It contains a few videos and links to seminal papers; the so-called “cat paper” was especially important. The article generated 436 comments before commenting was closed. I read the entire article but only a few comments. I suspect that reading both would give one a decent overview of the promise and perils of AI.
********One sentence that really caught my attention was: “There has always been another vision for A.I. — a dissenting view — in which the computers would learn from the ground up (from data) rather than from the top down (from rules).” It turns out this bottom-up perspective has been a driving force in recent developments of AI, just as it characteristic of the concept emergence and the methodological individualism of some social thinkers, especially economists.
********Although a major peril of AI revolves around the question of “What will happen work as we know it?” there is, perhaps, a more sinister concern. This is touched upon this week in The Economist where a leader (http://www.economist.com/news/leaders/21711904-worrying-experiments-new-form- social-control-chinas-digital-dictatorship) and a briefing (http://www.economist.com/news/briefing/21711902-worrying-implications-its-social-credit-project- china-invents-digital-totalitarian) discuss some aspects of China’s evolving work to develop digitized “social credit” scores for all of its inhabitants. Just as we all have more-or-less accurate credit scores, China’s social-credit scores look to address far more comprehensive aspects of one’s life. This article reminded me of previous readings (and a movie) that sought to predict future criminal activity. An article appeared this week in Quartz, entitled “The disturbingly accurate brain science that identifies potential criminals while they’re still toddlers” (http://qz.com/866064/neuroscience-study-brain-tests- identify-future-criminals-as-toddlers/).
(15 December 2016): “How Antibiotic-Tainted Seafood From China Ends Up on Your Table” (https://www.bloomberg.com/news/features/2016-12-15/how-antibiotic-tainted-seafood-from-china- ends-up-on-your-table)
------“Chinese agriculture has thrived for thousands of years on . . . recycling—the nutrients that fatten the pigs and geese also feed the fish. But the introduction of antibiotics into animal feed has transformed ecological efficiency into a threat to global public health. . . . The overuse of antibiotics has transformed what had been a hypothetical menace into a clear and present one: superbugs, bacteria that are highly resistant to antibiotics. By British government estimates, about 700,000 people die each 144
year from antibiotic-resistant infections worldwide. If trends continue, that number is expected to soar to 10 million a year globally by 2050—more people than currently die from cancer.”
********The feature food item in the article is shrimp, the country of origin of which is frequently mislabeled, a deception that is sometimes intentional. In some instances, the shrimp comprising one’s meal also contains a “healthy” dose of antibiotics. All this and more is related in the five-minute video featuring an interview with Bloomberg editor Megan Murphy. She used the term ‘regulatory arbitrage’ that seems very useful in discussing the differing regulatory regimes in different countries. With regard to shrimp, it seems, there is a real effort underway to use regulatory arbitrage to increase sales and profitability.
(16 December 2016): “Scandinavia’s Disappearing Cash Act” (https://www.bloomberg.com/news/articles/2016-12-16/scandinavia-s-disappearing-cash-act)
------“By the end of this month, Scandinavia’s last mint will have closed. Following in the footsteps of Sweden and Norway, Denmark has decided to outsource the production of its coins to Finland. The Danish central bank has already stopped printing banknotes. They’ve become so unfashionable that there’s no rush to find a subcontractor for those. From the European Central Bank to Venezuela to India, authorities are falling out of love with cash, particularly the kind of high-denomination banknotes favored by mobsters and drug dealers.” Scandinavia has been a trailblazer “in the global transition to a post-cash society. Crucially, its preference for electronic payments helps reduce tax evasion, a key ingredient for funding its generous welfare state.” The decline of cash has also affected the black economy. “According to a March report by Denmark’s Tax Ministry, the size of [Denmark’s] . . . black economy has fallen by a third between 2012 and 2014. Still, the Nordics’ shift away from cash has as much to do with convenience as with the fight against crime. A June report by the Danish central bank found that the cost of handling cash is more than double that of handling domestic debit card payments.”
********As the article suggests, Scandinavia provides a glimpse into what is likely to be the future of money and money substitutes in the U.S.
(16 December 2016): “Mapping the Growth of Disability Claims in America” (https://www.bloomberg.com/news/features/2016-12-16/mapping-the-growth-of-disability-claims-in- america)
------“If you’ve paid into Social Security, become injured or sick, and can no longer earn more than $1,130 a month, you can get a monthly subsidy from Social Security’s Disability Insurance Trust Fund. In 1990 fewer than 2.5 percent of working-age Americans were ‘on the check.’ By 2015 the number stood at 5.2 percent.” Although an aging population may be one reason for the increase, the geographic distribution of people on disability suggests that “Workers who might have endured pain for a physical job apply for disability when jobs disappear. This has created what some economists call ‘disability belts’—rural areas in Appalachia, the Deep South, and along the Arkansas-Missouri 145
border.” According to MIT economist David Autor, “Social Security disability benefits function as unemployment insurance” even though they were not designed to do so.
********The article includes a stunning map of the geographic distribution of disability claims. As noted in the article, the structure of existing disability payments may be discouraging some from seeking employment.
(18 December 2016): “OxyContin goes global—‘We’re only just getting started’” (http://www.latimes.com/projects/la-me-oxycontin-part3/)
------In the United States prescriptions “for OxyContin have fallen nearly 40% since 2010, meaning billions in lost revenue for its Connecticut manufacturer, Purdue Pharma. So the company’s owners, the Sackler family, are pursuing a new strategy: Put the painkiller that set off the U.S. opioid crisis into medicine cabinets around the world. A network of international companies owned by the family is moving rapidly into Latin America, Asia, the Middle East, Africa and other regions, and pushing for broad use of painkillers in places ill-prepared to deal with the ravages of opioid abuse and addiction. In this global drive, the companies, known as Mundipharma, are using some of the same controversial marketing practices that made OxyContin a pharmaceutical blockbuster in the U.S.” Regarding that global drive, former U.S FDA commissioners David A. Kessler notes that Mundipharma’s push into global markets is “right out of the playbook of Big Tobacco. As the United States takes steps to limit sales here, the company goes abroad.”
********Stefano Berterame, of the U.N.-affiliated International Narcotics Control Board, based in Vienna, notes that although most global pain problems could be solved with “very cheap morphine” the approach holds little interest for multinational drug companies due to its unprofitability. Purdue Pharma charges “hundreds of dollars a bottle for a month’s supply of OxyContin” but “Generic morphine, which provides similar pain relief, can cost as little as 15 cents a day.” A fascinating article, the third of a series put out by The Los Angeles Times. The comparison of Purdue’s use of the Big Tobacco “play book” seems apt. Indeed, any producer facing declining sales in one geographic market will look to other regions to replace sales lost. What is different here, though, is that the expansion of sales will likely take place in areas that have relatively less stringent regulations and are possibly less well equipped to deal with the likely aftermath of expanded sales of opioids for pain management.
(21 December 2016): “The Highly Charged Way to Play Electric Cars” [SR](http://www.wsj.com/articles/the-highly-charged-way-to-play-electric-cars-1482250405)
------“The next automotive revolution will be electric, or so they say. The financial spotlight is on the car companies that will produce them, and especially on pioneer Tesla Motors, but are investors getting things wrong? Isn’t there equal or perhaps far greater value in enabling electric vehicles?” Maybe not. “If every single car in America were electric then it would be awful for petroleum companies, disastrous for refiners and fatal for fuel retailers, but merely a challenge for electric utilities. It would boost electric consumption by 25%. But, because so much electricity is produced to 146
keep the system reliable, the actual increase in generation capacity would likely be far more modest. . . . In a theoretical exercise, a maximum of 73% of miles driven nationally could be supported using available resources—something for almost nothing.”
********The article contains a chart comparing the price of gallons and e-gallons. You can find a calculator, which provides comparisons by state and the U.S. average, at: https://energy.gov/maps/egallon. For North Carolina, the price of a gallon of gas is $2.16 and the price of an e-gallon is $1.08; in Wisconsin, the respective prices are $2.16 and $1.34.
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(22 December 2016): “The coming battle between economists and the Trump team over the true cost of climate change” (https://www.washingtonpost.com/news/energy-environment/wp/2016/12/22/the- coming-battle-between-the-trump-team-and-economists-over-the-true-cost-of-climate-change/)
********The “social cost of carbon” is likely to be a matter of additional discussion, debate, and research after January 20, 2017, and this article provides some useful background. In addition to the social cost of carbon, the appropriate discount rate to use in making benefit and cost calculations will be a point of contention. All this largely falls under the heading of “the invisible foot,” as the social cost of carbon and the discount rate feed into a variety of court decisions and federal legislation.
(24 December 2016): “Bagehot: The parable of JD Wetherspoon” (http://www.economist.com/news/britain/21712146-how-chain-pub-became-essential-british- institution-parable-jd-wetherspoon)
------“How easy it is to dislike chain pubs . . . [but] Bagehot begs to differ. . . . To dig below the snobbery about pub chains is to witness a clever business at work. Mr [Tim] Martin opened his first branch in London in 1979 and named it after a teacher, Mr Wetherspoon, who had told him he would never amount to anything. That it grew into a national institution, he says, comes down to three points. . . . First, stay close to the ground. Mr Martin spends two days a week visiting his pubs. . . . Second, keep things simple . . . Third, bear down on prices. Many small businesses in Britain fail because they charge too much in the country’s wage-stagnant economy.” These, combined with the “use of grand old civic buildings” create a “stay-and-linger atmosphere . . . producing the self-reinforcing cycle that lies at the heart of his business: larges sales begetting the decent profits that make possible low margins that further drive sales.”
********An article that recalls for me the importance of “third places,” as noted in The Great Good Place (https://www.amazon.com/Great-Good-Place-Bookstores-Community/dp/1569246815/), by Ray Oldenburg. While we are on the British brew scene, The Economist also has a nice piece of India Pale Ales, which includes a bit of history and a bit about the current craft brew scene. Here is the link: http://www.economist.com/news/christmas-specials/21712029-lagers-may-be-ubiquitous-india-pale- ales-are-beers-backstory-history.
********Finally, the role that yeast plays in the taste of brewed beverages like beer and ale is discussed in a recent copy of The Asheville Citizen-Times, the occasion being the announcement that White Labs will be opening a yeast-production facility in Asheville in January 2017. As the article notes, “Malts and barley are not super flavorful, and hops are not very fruity, but yeast has more than 500 aroma and flavor compounds that contribute to beer’s profile.” You can learn more about the opening of White Labs in Asheville at: http://www.citizen- times.com/story/money/business/2016/12/26/white-labs-starts-yeast-production-next- month/95650456/. You can learn more about White Labs at: http://www.whitelabs.com/. 148
(25 December 2016): “A Physicist of Online Groceries” (http://www.nytimes.com/2016/12/23/business/instacart-physicist-online-groceries-emmanuel- turlay.html)
********This is a brief interview with 32-year-old Emmanuel Turlay, who has a Ph.D. in physics and is “a technical lead manager at Instacart in San Francisco.” Turlay notes: “Instacart has shoppers who buy groceries and deliver them to consumers who order them through the company’s website or mobile app. I help write the software programs that calculate customers’ charges and provide the technical framework to help the engineers on my team make good programming decisions.” I thought it interesting that said that one of his challenges is “Making sure we charge customers correctly for an order.”
(28 December 2016): “An Escape Hatch for the Professional Rut” (http://www.wsj.com/articles/an- escape-hatch-for-the-professional-rut-1482850801)
------“The unlucky college class of 2009 graduated into the worst job market in decades. Many of its members have never caught up, and remain stuck in low-paying, dead-end jobs. Katlin Fox, 29, represents a ray of hope for people her age. A member of the University of Rhode Island’s Class of ’09, she’d wanted to join a marketing team doing creative projects. Instead, she took the only job she was offered—as an executive assistant.”
********The remainder of the article outlines how Katlin persevered, recognized what she needed to know, and learned what necessary. In addition to her initiative, this is a story of how important an immediate supervisor can be in facilitating employee growth. In the end, though, that can mean having to say goodbye.
(28 December 2016): “The Best Films of 2016 (for Behavioral Economists)” (https://www.bloomberg.com/view/articles/2016-12-28/the-best-films-of-2016-for-behavioral- economists)
********Cass Sunstein, author of many books, e.g., Nudge, and a former member of the Obama administration, awards his Behavioral Economics Oscars, the Becons. In it he recognizes the work of Jon Favreau (Best director), Ryan Gosling (Best actor), Isabelle Huppert (Best actress) and the movies “Weiner” (Best documentary), and “Rogue One” (Best movie). In doing so one gets a chance to learn a bit of behavioral economics, too. Especially worth noting is the discussion around “Weiner,” which relates to System 1 (Fast) and System 2 (Slow) thinking. This is, of course, pretty much tongue in cheek but it is the end of the year and a bit of levity is appropriate. I’m intrigued by Isabelle Huppert’s work in “Elle.”
(28 December 2016): “The Evolution of Convenience Food in America” (http://daily.jstor.org/the- evolution-of-convenience-food-inamerica/) 149
------“Meal kits, currently a niche product sold by startups like Blue Apron, could be hitting the bigtime, with big-name food companies like Tyson and Campbell Soup now entering the market. If that signals a change in the way Americans cook and eat, it’s nothing compared with the way frozen food disrupted meals in the mid-twentieth century, as Shane Hamilton explained in a 2003 paper.” Frozen foods began with the Birds Eye brand in the 1920s. Until the late 1940s, however, “Birds Eye and its competitors sold frozen foods only to a limited set of high-end consumers.” All that changed, however, with the advent of the use of mechanically refrigerated railcars and trucks, as well as higher incomes after WWII. Over time, frozen foods became less costly and were used to by a broader demographic, aided in part by “collaboration between the [frozen-food] industry and government regulators” and expanded market research.
********A brief article by Livia Gershon that shows the importance of technological change and the need to check one’s assumptions regarding who is using your product and how it is being used. The foundational article for this post is Shane Newton, “The Economies and Conveniences of Modern-Day Living: Frozen Foods and Mass Marketing, 1945-1965.” A pdf of it is available at a link at the bottom of Gershon’s post.
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[The Invisible Forces Weekly: Economics with a Broader View] 298 (4 January 2017)
(7 April 2016): “Hail the Maintainers” (https://aeon.co/essays/innovation-is-overvalued-maintenance- often-matters-more)
********This article was recently called to my attention and its topic seems timeless: the distinction between innovation and maintenance, and the labor of each. Those who innovate (innovators) are celebrated as entrepreneurs and lionized in the news and movies, whereas those humble folks who maintain the infrastructure (maintainers) are belittled or, at best, ignored. This article, as it title suggests, seeks to great balance of treatment between the two. It does this by posing the question, “is there a better way to characterize relationships between society and technology?” The question can be addressed in three ways: First, understanding that “technology is not innovation.” Second, by recognizing “the essential role of basic infrastructures.” Third, a focus on “infrastructure or on old, existing things rather than novel ones reminds us of the absolute centrality of the work that goes into keeping the entire world going.” The third point leads to the basic point that “Despite recurring fantasies about the end of work or the automation of everything, the central fact of our industrial civilization is labour, and most of this work falls far outside the realm of innovation.”
********One author who has written at length on the topics above, as noted in the article, is historian David Edgerton, The Shock of the Old: Technology and Global History since 1900 (https://www.amazon.com/Shock-Old-Technology-Global-History/dp/0199832617/). Among the many thoughts evoked by the article, the one that is easiest to state is the gendered nature of labor, i.e., innovation is “male” while maintenance is “female.” As noted in the article, “Feminist theorists have long argued that obsessions with technological novelty obscures all of the labour, including housework, that women, disproportionately, do to keep life on track.”
********Connected to this is the so-called “great man” theory of history (https://en.wikipedia.org/wiki/Great_Man_theory), in which history is “largely explained by the impact of ‘great men’, or heroes; highly influential individuals who, due either their personal charisma, intelligence, wisdom, or political skill utilized their power in a way that had a decisive historical impact.” Evidently the Scottish writer Thomas Carlyle is most-closely identified with this view. In contrast to this is view of English writer Herbert Spencer, who held that such great men “are the products of their societies, and that their actions would be impossible without the social conditions built before their lifetimes.” These different views are, I think, nicely reflected in President Obama’s “You didn’t build that” comment during the 2012 campaign. Here the President presented a view quite Spencerian, while those who countered him were playing Carlyle’s theme. You can learn more about the President’s words at: https://en.wikipedia.org/wiki/You_didn't_build_that.
(13 December 2016): “Thomas C. Schelling, Master Theorist of Nuclear Strategy, Dies at 95” (http://www.nytimes.com/2016/12/13/business/economy/thomas-schelling-dead-nobel-laureate.html) 151
********I somehow lost track of the passing of Nobel laureate (2005) Thomas Schelling and I am repairing that error now. There is abundant information about his life and work easily found by an online search. Schelling is well known for his contributions to strategic thinking in the Cold War, especially as it related to nuclear deterrence. May there be minds like his in the service of U.S. and world interests in the years to come. In the 1970s Schelling also contributed meaningfully to the development of the consequences of white residents who expressed “only a slight preference for living among members of their own race.” He did that while using the term ‘tip point’ that had previously been used political scientist Morton Grodzins; Malcolm Gladwell’s best-selling 2002 book The Tipping Point (https://www.amazon.com/Tipping-Point-Little-Things-Difference/dp/0316346624/).
********Although sometimes described as a game theorist, Schelling was more a creative user of game theoretic ideas who continually urged strategic thinkers to expand the set of things they considered, looking to address new issues rather than be content to solve problems already known to be solvable. In writing this I am reminded of one of the most useful things I have read, which appeared in Men of Mathematics (https://www.amazon.com/Mathematics-Touchstone-Book-E-T- Bell/dp/0671628186/), by E.T. Bell. On page 419 it is related that mathematician Felix Klein was once asked by a student to share the “secret of mathematical discovery.” Klein responded, “Choose one definite objective and drive ahead toward it. You may never reach your goal, but you will find something of interest on the way.” I have tended to focus on the second sentence of the quotation, but now realize that the first sentence is very important, too.
********There is a nice one-page tribute to Schelling in The Economist at: http://www.economist.com/news/finance-and-economics/21712133-any-time-somebody-talks-about- deterrence-theyre-influenced-schelling-thomas. I especially liked its coverage of his Nobel acceptance speech, in which he observed that “the most spectacular event of the past half century is one that did not occur. We have enjoyed 60 years without nuclear weapons exploded in anger . . . what a stunning achievement—or, if not achievement, what stunning good fortune!” The article goes on to note “If achievement was the word, the credit was partly his.” This made me think that perhaps Schelling should have won the Nobel Peace Prize, too. So, I looked to see if someone else had had this idea. As it turned out, the answer was “Yes.” Tom Wright of Harvard University made the connection in a 2005 piece in The Irish Times http://www.irishtimes.com/opinion/schelling-helped-stop-the-cold-war- turning-very-hot-1.506067).
********So, has anyone ever won the Nobel Peace Prize and another Nobel Prize? Yes: Linus Pauling (Physics and Peace). He is one of four people to have won two such prizes, the others being: John Bardeen (Physics twice); Marie Curie (Physics and Chemistry); and Frederick Sanger (Chemistry twice). The International Committee of the Red Cross has won the Nobel Peace Prize three times (1917, 1944, and 1963) and the United Nations High Commissioner for Refugees has won the Nobel Peace Prize twice (1954 and 1981). You can learn more about the multiple recipients via https://en.wikipedia.org/wiki/Category:Nobel_laureates_with_multiple_Nobel_awards. 152
(28 December 2016): “Amazon to Flip the Switch on Massive Wind Project in North Carolina” (http://www.ecowatch.com/wind-farm-amazon-2168453431.html)
------“Before the ball drops on New Year’s Eve, 104 wind turbines scattered across 22,000 acres of farmland near Elizabeth City, North Carolina, will begin churning out electricity. It will be the South’s first large-scale wind farm. At 208 megawatts, Avangrid’s facility has the capacity to capture enough of the sky’s kinetic energy to power 61,000 homes. But instead of homes, this electricity will run data centers for Amazon Web Services, a subsidiary of Amazon.com.” Although the South isn’t usually thought of as being rich in wind resources, technological improvements, policy initiatives, and the “federal Production Tax Credit, have enabled wind’s price tag to plummet 90 percent over the past 25 years, making it more alluring in the competitive energy market.” Still, one of the factors restricting the adoption of wind is “the lack of independent system operators (ISOs) or regional transmission organizations (RTOs).” The wind farm near Elizabeth City was made possible because the area “is part of an RTO called PJM Interconnection. PJM allows Avangrid, the wind farm developer, to sell electricity directly to Amazon Web Services for its data centers at a price per kilowatt-hour negotiated by the two parties.” As a result of this arrangement, Avangrid “is now the largest taxpayer by far in Perquimans County.”
********A good example of how regulation can protect an incumbent electricity provider and slow the adoption of an alternative technology.
(29 December 2016): “Stop saying that 2016 was the ‘worst year’” (https://www.washingtonpost.com/posteverything/wp/2016/12/29/stop-saying-that-2016-was-the- worst-year/)
------“Americans almost always think that the year coming to a close is the worst.” Why do they have such views? There are a variety of reasons. For example, “Many misunderstand how the world is changing or ignore positive change.” And some people simply do not know about positive developments, a phenomenon that isn’t new. This lack of knowledge is part the result of the journalistic bias toward specific events, like disasters, as opposed to long-term trends like “improving global health, falling poverty, [and] environmental progress . . . The focus on single events and neglect of slow developments selects negative news instead of often positive developments.”
------Furthermore, “The negative bias of event news is a problem on the supply side, but there are equally important problems on the demand side. In fact, to be on the lookout for signs of danger is hard-wired in our human psychology. Evolution has shaped our human nature to pay attention selectively and left us with a negativity bias because it is much more important for our survival to pay attention to threats than to positive changes. A missed opportunity is unfortunate, a missed danger can immediately threaten our survival.”
********This article again calls to mind Daniel Kahneman’s book Thinking Fast and Slow (https://www.amazon.com/Thinking-Fast-Slow-Daniel-Kahneman/dp/0374533555/), with fast thinking 153
oriented toward the event, i.e., the short term, and slow thinking oriented toward the trend, i.e., the long term. Of course, survival is something that is both short term and long term. This focus on fast and slow thinking reminds me of a literature I was aware of some years back that examined “multiple utility functions.” I wonder if current writers have made the connection between this “older” literature and the “newer” literature of behavioral economics? A place to start on the “multiple utility” literature is the 1986 article “The Case for a Multiple-Utility Conception,” by Amitai Etizioni (https://www2.gwu.edu/~ccps/etzioni/A175.pdf). A resource that looks to address this more specifically, since it includes the term ‘multiple utility’ is Handbook of Contemporary Economics: Foundations and Developments (https://www.amazon.com/Handbook-Contemporary-Behavioral- Economics-Developments/dp/1138953202/). My sense is that the multiple utility literature stems from Amartya Sen’s 1977 article “Rational Fools: A Critique of the Behavioral Foundations of Economic Theory,” Philosophy & Public Affairs 6,4 (Summer 1977): 317-44. You can find at copy at: https://www.uclouvain.be/cps/ucl/doc/cr-cridis/documents/sen_on_TCR_rational_fools.pdf. Just to be explicit, it seems like a two-utility approach to thinking fast and slow would involve a hierarchy of preferences, one dealing with fast (and first) and the other dealing with slow (and second).
(30 December 2016): “Q&A: Cathy O’Neil, author of ‘Weapons of Math Destruction,’ on the dark side of big data” (http://www.latimes.com/books/jacketcopy/la-ca-jc-cathy-oneil-20161229-story.html)
********Cathy O’Neil is the author of Weapons of Math Destruction: How Big Data Increases Inequality and /threatens Democracy (https://www.amazon.com/Weapons-Math-Destruction- Increases-Inequality/dp/0553418815/). This book has been reviewed widely and has definitely caught the attention of many. This Q&A will give you a good idea of what the book is all about, i.e., the auditing of algorithms for their potential destruction use. In addition to raising the issue of “gaming” an algorithm, she also notes that some of those, like teachers, who are being judged algorithmicly “don’t understand how they’re being evaluated at their job.” (This is, of course, also a concern of those who are not being judged algorithmicly.) O’Neil seems to think that some algorithms are potentially dangerous and others are not. According to her, “the most dangerous ones . . . have three characteristics: scale, secrecy and the capacity to do harm.” This seems like a book worthy of study.
(31 December 2016): “Scientists Loved and Loathed by an Agrochemical Giant” (http://www.nytimes.com/2016/12/31/business/scientists-loved-and-loathed-by-syngenta-an- agrochemical-giant.html)
********This article examines the interactions between three university researchers and their corporate funders. As it notes, receiving corporate funds can be a Faustian bargain.
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[The Invisible Forces Weekly: Economics with a Broader View] 299 (11 January 2017)
(4 January 2017): “Why Men Don’t Want the Jobs Done Mostly by Women” (http://www.nytimes.com/2017/01/04/upshot/why-men-dont-want-the-jobs-done-mostly-by- women.html)
------“It hasn’t been a great time to be a man without a job. The jobs that have been disappearing, like machine operator, are predominantly those that men do. The occupations that are growing, like health aide, employ mostly women. One solution is for the men who have lost jobs in factories to become health aides. But while more than a fifth of American men aren’t working, they aren’t running to these new service-sector jobs. Why? They require very different skills, and pay a lot less. They’re also seen as women’s work, which has always been devalued in the American labor market.” People who study the movement of men into fields in which women traditionally work, say that “Much of men’s resistance to pink-collar jobs is tied up in the culture of masculinity.” Indeed, “Many unemployed men who did manual labor say they can’t take the time and make the effort to train for a new career because they have bills to pay. And they say they chose their original careers because they wanted to build things, not take care or people.”
********I just finished reading Boom, Bust, Exodus: The Rust Belt, the Maquilas, and a Tale of Two Cities (https://www.amazon.com/Boom-Bust-Exodus-Maquilas-Cities/dp/0190608862/), by Chad Broughton, and the discussions of the retraining efforts of men and women in Galesburg, Illinois in consequence of the closing of the enormous Maytag facility there seem largely, but not perfectly, consistent with this article. Galesburg’s story is one of bust, while that of Reynosa of Tamaulipas, Mexico is one of boom. This is one of those books, published in 2015, that makes the election of Donald Trump easier to understand.
********Although there may have been a boom in Reynosa, not everyone prospered as much as expected. That seems, in part, to be due to the failure of economic policy-makers in Mexico. This seems to be the main point of “Mexicans Are the Nafta Winners? It’s News to Them” (http://www.nytimes.com/2017/01/04/world/americas/mexico-donald-trump-nafta.html). One might conclude that the policy-makers believed too much in the power of laissez-fairydust the wonderful expression that recently won the American Dialect Society’s Creative Word of the Year. University of Michigan linguist and English professor has an informative and entertaining article on all the words that you can find at: http://www.chronicle.com/blogs/linguafranca/2017/01/08/words-of-the-year- 2016/.
(5 January 2017): “The High-Cost, High-Risk World of Modern Pet Care” (https://www.bloomberg.com/news/features/2017-01-05/when-big-business-happens-to-your-pet)
------“Pet care is undergoing the same sort of consolidation transformed human health care in the 1990s.” The story of veterinarian John Robb provides an example while also providing a glimpse into some of the veterinary practices that are employed. “In 1999 he sold his first practice for $1 million to 155
VCA—then called Veterinary Centers of America—a consolidator that’s bought hundreds of animal hospitals and trades on the Nasdaq exchange under the ticker WOOF. Then, in 2008, he paid $400,000 for his Banfield franchise in prosperous Stamford [, Connecticut.] Banfield had itself traded hands just a few months before, when the veterinarian who founded the company sold it to Mars, the giant candy and pet-food manufacturer. The change had dire consequences for Robb and, he says, for millions of pets.”
********The article is of interest from many perspectives. First, it provides a look at how consolidation is playing out in veterinary care services. Second, it summarizes some of the veterinary practices employed by the consolidated units. Third, it points out the increasing role of lab fees in pet care. Finally, it gives a bit of information related to vaccines and the role that a body like the American Animal Hospital Association play in developing suggested veterinary practice.
********The article in Bloomberg Businessweek appeared on the eve of Mars acquisition of VCA for $7.7 billion. VCA “owns about 800 animal hospitals, a lab business and dog day care franchises that operate under the name camp Bow Wow.” Bob Antin, the CEO of VCA, was not looking to sell his business, but he said that “the prospect of joining Mars, and no longer being a public company, was intriguing.” You can learn more at: https://www.nytimes.com/2017/01/09/business/dealbook/mars-to- buy-pet-hospital-chain-for-7-7-billion.html. Particulars about the purchase of VCA can be read at: http://www.mars.com/docs/default-source/default-document-library/mars-incorporated-to-acquire-vca- inc.pdf.
(8 January 2017): “Data Could Be the Next Tech Hot Button for Regulators” (https://www.nytimes.com/2017/01/08/technology/data-regulators-google-facebook-monopoly.html)
------“Wealth and influence in the technology business have always been about gaining the upper hand in software or the machines that software ran on. Now data—gathered in those immense pools of information that are at the heart of everything from artificial intelligence to online shopping recommendations—is increasingly a focus of technology competition. And academics and some policy makers, especially in Europe, are considering whether big internet companies like Google and Facebook might use their data resources as a barrier to new entrants and innovation.”
********The article provides a useful summary of some of the issues that relate to the commercial use of large data sets, especially those that are private. As it indicates, although proprietary knowledge can be used to charge personalized prices, that same knowledge can be used to create personalized goods and services. Thus, although personalizing may lead to higher prices, it may also lead to higher quality goods and services. According to Andrew Ng, a former Google scientist who now is chief scientist at Chinese Internet search giant Baidu, “Data is the defensible barrier, not algorithms.”
(9 January 2017): “Farmers Get Creative in Reaping Profits” [SR](http://www.wsj.com/articles/farmers-get-creative-in-reaping-profits-1483957802) 156
------“Instead of selling all of this fall’s record corn harvest to ethanol plants or foreign livestock farmers, Jim and Jamie Walter are turning a portion into a more lucrative product: whiskey. The father-and-son Illinois farmers are among a small group finding unique ways to wring money from their crops, while a commodity glut pushes grain prices to multiyear lows. They hope satisfying a consumer shift toward locally made, high-quality products will be more reliably profitable than turbulent global grain markets.” These developments counter some longer-term trends. “Since World War II, grain farmers have sought to boost profits mostly by increasing yields, driving down costs and expanding their operations. Bigger, more sophisticated equipment and high-tech seeds have encouraged a trend toward larger, more capital-intensive farms. Now, growing demand for locally produced food and drinks is coinciding with concerns about volatile crop prices, providing an opportunity for farmers to try shrinking the gap between their crops and consumers.”
********It is interesting to see how changing consumption patterns driven by cultural trends can result in a change of how farmers think about what and how they produce. Surely the ethanol boom affected corn production. But with the passing of that boom and the resulting lower corn prices, farmers had to rethink their approach, e.g., decide to expand output to reduce average cost, produce other crops with existing land, or use existing output to produce new products. With the last approach, it might well be necessary to change existing output, too, as the corn that appeals to cattle and makes good ethanol, may not be the type that appeals to those who drink locally-sourced corn whiskey.
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[The Invisible Forces Weekly: Economics with a Broader View] 300 (18 January 2017)
(11 January 2017): “Will We Always Have the Poor Among Us?” (http://daily.jstor.org/will-we- always-have-the-poor-among-us/)
------“Assurances to the contrary from Jesus . . . , we may be close to ending poverty as we know it. That’s the good news shared recently by New York Times columnist Nicholas Kristof: simply put, the number of poor among us is declining rapidly. According to the latest figures from the World Bank, in 2011 only 14 percent of the world’s population lived in ‘extreme’ poverty, down from 35 percent in 1993. The improvement in conditions around the world has been steady enough that in late 2015 when UN member nations set themselves 17 new ‘Sustainable Development Goals,’ first on the list was to eradicate extreme poverty by 2030. Similar good news has emerged from the Census Bureau about poverty levels in . . . the US. If you think this sounds too good to be true, you’re not alone. as Kristof reports, 95 percent of Americans today believe poverty is getting worse, a perception they share with the great majority of the developed world.”
********The general perception about poverty is perfectly consistent with the argument put forward in an article in The Washington Post (https://www.washingtonpost.com/posteverything/wp/2016/12/29/stop-saying-that-2016-was-the- worst-year/) noted in TIF Weekly 298, i.e., people tend to be unaware of long-term trends, focusing instead on recent events. The article goes on to examine a variety of notions of ‘poverty’, drawing upon a 2005 article in the Journal of Epidemiology & Community Health. In so doing attention is given to the “capabilities view” of human well-being developed by Amartya Sen and Martha Nussbaum. The article provides references to an important publication of each author.
(13 January 2017): “Edmund Burke and the Birth of Traditional Conservatism” (http://daily.jstor.org/edmund-burke-and-the-birth-of-traditional-conservatism/)
------“Edmund Burke (1729-1797) is the philosophical fountainhead of modern conservatism. But he didn’t start out that way. The Irish-born politician started as a fiery Whig, a voice for American independence and for Dissenters and radicals at home in Great Britain. He stood against slavery and pros3ecuted the head of the British East India Company for corruption. Then he met the French Revolution, and his views seemed to change abruptly. . . . But was it, indeed, the French Revolution that caused ‘an abrupt political tack from advocating parliamentary reform, religious toleration, and American liberty’? Or was Burke’s critique of the French Revolution, as Burke himself sometimes argued, ‘first and foremost a parable for the English of his day’? Historian McCalman argues that understanding Burke’s domestic experience is key to explaining his transformation. According to McCalman, Burke’s radical transformation was greatly fanned, if not sparked, by the Gordon Riots of 1780. Names after Lord George Gordon, the firebrand head of the Protestant Association (and onetime friend of Burke), this chaotic political uprising essentially scared the reformer out of Burke.” 158
********Burke’s Reflections on the Revolution in France (1790) is one of those essential books that I have yet to read, even though it is widely acknowledged to be the source of the intellectual thread of conservative thought. What I find fascinating about the discussion of the Gordon Riots is that Burke evidently had much time—ten years—to reflect upon revolution-like events that affected him personally, so perhaps the French Revolution simply provided him with the opportunity to write out ideas that had long been developing. Not so much, then, a momentary flash, but something sustained. There is a link to the McCalman article, “Mad Lord George and Madame La Motte: Riot and Sexuality in the Genesis of Burke’s Reflections on the Revolution in France, at the bottom of the post.
(13 January 2017): “Working for an Algorithm Might Be an Improvement” (https://www.bloomberg.com/view/articles/2017-01-13/working-for-an-algorithm-might-be-an- improvement)
------“Bridgewater, the world’s largest hedge fund, has been portrayed as a bizarre Moneyball-type machine in which employees’ every move is monitored and assessed, increasingly by computer algorithms. Awful as that may sound, what if it’s actually a step toward a happier and more prosperous world? Granted, descriptions of the place—including a recent Wall Street Journal article to which founder Ray Dalio has taken vociferous offense—make it seem pretty dystopian. The firm, for example, amasses employee data to produce individual ‘Baseball Cards,’ with scores and ratings on dozens of attributes. That’s great if the system turns you into a Honus Wagner card, but possibly demoralizing for anyone else.” But Bridgewater isn’t the only company employing algorithms. “Offices around the country are deploying tools to continuously monitor and assess employee activity.” Such approaches are thought to stem from the work of Frederick Winslow Taylor, especially the 1911 Principles of Scientific Management (https://www.amazon.com/Principles-Scientific- Management-Frederick-Winslow/dp/0486299880/). “Yet the theory’s namesake, Frederick Taylor, didn’t set out to maximize efficiency at the expense of employees’ sanity. Rather he wanted to improve worker welfare. The Progressive movement was in its early days, and social and political activists wanted to stop industrialists from exploiting the working class. Taylor believed that his system for greater productivity would align the interests of employees and management.”
********The article indicated that the measured developed by Taylor, and as they are used by Bridgewater, are meant more to be used for employee coaching rather than employee winnowing. Perhaps I should read the book. Regardless, as the article indicates, the same measure that can be used to coach can also be used to winnow. An overview of Taylor and his work can be found at: https://en.wikipedia.org/wiki/Frederick_Winslow_Taylor.
********Imbedded in the Bloomberg article is a link to another article in The Financial Times that has an informative and somewhat lengthy article “Gig Economy: When your boss is an algorithm” (https://www.ft.com/content/88fdc58e-754f-11e6-b60a-de4532d5ea35). Within it there is a link to an nine-minute podcast “Return of ‘Taylorism’ on steroids” (http://podcast.ft.com/2016/09/08/return-of- taylorism-on-steroids/). 159
(15 January 2017): “A gynecologist secretly photographed patients. What’s their pain worth?” (http://wpo.st/lyjR2)
********The article takes up the challenging problem of how to assign monetary awards to thousands of women who suffered psychological trauma associated with surreptitious photographs taken by a trusted gynecologist.
(15 January 2017): “Tax Refund Loans Are Revamped and Resurrected” (https://www.nytimes.com/2017/01/15/business/tax-refund-loans-are-revamped-and-resurrected.html)
------Tax-refund loans are returning but this time with a difference. Formerly such loans were issued by tax-preparation firms like H&R Block and its competitors with high interest rates and fees, but such loans became “nearly extinct after a regulatory crackdown that forced most major banks out of the market.” But with the disappearance of such refund-anticipation loans (RALs), customers for tax- preparation services also disappeared. So now, “The nation’s big tax-preparation companies are so desperate for customers that they are willing to put money up front—with absolutely no hidden fees or interest charges, and no ironclad guarantees that the companies will get paid back.” As customers return, firms like Jackson Hewitt are treating the loans, with origination costs of $32-36, as “a marketing expense.” Firms issuing such loans are looking to make up the costs of such loans by selling “add-on products” and the additional fees associated with them.
********It is interesting to see how the RAL has morphed in response to regulatory change and the subsequent reduction in customers. In relation to this, I was struck by the statement of Greg Steinlicht of H&R Block, “This [offering of no-cost loans] is an effort to arrest our client loss, to bring more people to our office . . . The product went away for several years, but the client demand for it never did.”
(16 January 2017): “A Rare Corner of Finance Where Women Dominate” (https://www.nytimes.com/2017/01/16/business/dealbook/women-corporate-governance- shareholders.html)
------“Women hold the top positions in corporate governance at many of the biggest mutual funds and pension funds—deciding which way to vote on the directors of a company board. They make decisions on behalf of teachers, government workers, doctors and most people in the United States who have a 401(k). The corporate governance heads at seven of the 10 largest institutional investors in stocks are now women, according to data compiled by The New York Times. Those investors oversee $14 trillion in assets.”
********I didn’t see much in the way of explanation regarding the perceived dominance of women in corporate governance. That being said, the article notes that “Corporate governance is playing a growing role within the broader ecosystem of corporate America. Each spring, publicly traded companies hold shareholder meetings and outline business strategy for the coming year.” It is further 160
noted that the voting power on institutional investors “is rarely wielded to confront companies. . . . And their approach contrasts sharply with that of brash activist billionaires like William A. Ackman and Daniel S. Loeb, who have made a name for themselves as corporate agitators” who bring about change “by theatrically pounding on the front doors of companies and using the public court of opinion to bully companies into changing their strategies.” Perhaps women tend to better able to navigate the diplomacy of corporate governance than men.
(17 January 2017): “As Pot Prices Plunge, Growers Scramble to Cut Their Costs” (https://www.bloomberg.com/news/articles/2017-01-17/as-pot-prices-plunge-growers-scramble-to-cut- production-costs)
------“The increasing supply of legal marijuana is turning into a major buzz kill for growers as prices plunge—and an opportunity for companies that can help cut production costs. Prices are tumbling as formerly illicit cultivators emerge from the shadows to invest millions of dollars in massive pot factories. In Colorado, the average price sought by wholesalers has fallen 48 percent to about $1,300 a pound since legal sales to all adults started in January 2014, according to Cannabase, operator of the state’s largest market. Supply is surging as growers expand and install the latest agricultural technology.” According to John Chandler, a vice president at Urban-Gro of Lafayette, Colorado, a focus on efficiency “can cut production costs for some indoor growers to less than $300 a pound from more than $1,000.” Some anticipate that the “regulated market in North America could triple to more than $20 billion in five years, from $6.7 billion last year . . . One caveat surrounding the booming cannabis industry is President-elect Donald Trump’s choice for attorney, Senator Jeff Sessions of Alabama, an ardent marijuana foe. But it remains to be seen if Trump or the Republican-controlled Congress will attempt to challenge the states that have legalized the drug.”
********A nice example of the interaction of the invisible foot—legal and pollical forces—and the invisible hand—economic forces. In some sense the market demand for legal marijuana has always been there. What is different is that the market supply of legal marijuana has expanded as laws have changed in some states. With increased supply and unchanged demand, market prices have fallen and reduced the profitability of firms. This has put more urgency in the cost-cutting activities of firms, leading them to increase scale and modernize production. As the article goes on to note, however, there is now increased legal risk from the incoming administration. It will be interesting to see how this plays out.
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[The Invisible Forces Weekly: Economics with a Broader View] 301 (25 January 2017)
(17 January 2017): “The Upshot: Presidents Have Less Power Over the Economy Than You Might Think” (https://www.nytimes.com/2017/01/17/upshot/presidents-have-less-power-over-the-economy- than-you-might-think.html)
------“Presidential reputations rise or fall with gross domestic product. The state of the economy can determine if presidents are re-elected, and it shapes historical memory of their success or failure. . . . But the reality is that presidents have far less control over the economy than you might imagine. Presidential economic records are highly dependent on the dumb luck of where the nation is in the economic cycle. And the White House has no control over the demographic and technological forces that influence the economy. Even in areas where the president really does have power to shape the economy . . . the relationship between presidential action and economic outcome is often uncertain and hard to prove.”
********The article does a nice, compact job of summarizing the principal factors that affect economic performance, indicating those areas where the president has little direct control—monetary policy—and slight direct control—fiscal policy. Other areas of potential influence affect the economy slowly.
********There are things, however, that can affect the economy very quickly—political events. This is discussed briefly in “How Political Events Change Currency Value” (https://daily.jstor.org/how- political-events-change-currency-value/). The post points out that the effect of these events tend to be transient and short term, whereas larger economic factors “are the fundamental determinants of a currency’s health.” The foundation article for this post is “Democracy and Markets: The Case of Exchange Rates,” which appeared in the American Journal of Political Science in 2000. The article can be accessed at the bottom of the post.
(19 January 2017): “Get Rich. Save the World. Gut Fish” (https://www.bloomberg.com/news/features/2017-01-19/get-rich-save-the-world-gut-fish)
********This article is hard to summarize. In part, it is the story of 32-year-old venture capitalist Rod Baird who is looking in unusual places to invest. In this case it is the waterways of western Kentucky. In part, it is the story of “Lula Luu and John Crilly, . . . energetic former academics” who created the business Fin Gourmet, which draws upon the abundant Asian carp to make its products. And in part it is the story of Ronny Hopkins, a commercial fisherman in Kentucky. As Baird notes, “If Donald Trump wants to deliver on his promise to create rural jobs, he doesn’t need to create anything out of thin air.” The problem is that “The talent is there, but the capital isn’t.”
********What drew me to this article was its explicit mention of carp, which was (and presumably is) ubiquitous in the Rock River of my hometown of Watertown, Wisconsin of my youth. Were people really harvesting carp and selling them in restaurants as something desirable? Yes. It turns out that 162
Asian carp are something else. They can “grown into 70-pounders known to jump as high as 10 feet.” As the article notes, there a lots of YouTube videos shown the carp “in flight.” Here is one: https://www.youtube.com/watch?v=tLmJjRqXDCo. Evidently the sound of boat motors sets them off.
(21 January 2017): “Schumpeter: Businesses can and will adapt to the age of populism” (http://www.economist.com/news/business-and-finance/21714935-how-executives-balance- shareholder-expectations-and-social-pressures-businesses-can)
------“As they slid down the streets of Davos this week, many executives will have felt a question gnawing in their guts. Who matters most: shareholders or the people? Around the world a revolt seems under way. A growing cohort—perhaps a majority—of citizens want corporations to be cuddlier, invest more at home, pay higher taxes and wages and employ more people, and are voting for politicians who say they will make all that happen. Yet according to law and convention in most rich countries, firms are run in the interest of shareholders, who usually want companies to use every legal means to maximise their profits.” Although naïve executives “fear that they cannot reconcile these two impulses . . . Wiser executives know that shareholder value comes in shades of grey.” Schumpeter “reckons there are six distinct corporate tribes, each with its own interpretation of what shareholder value means. Firms have some flexibility to choose which one they belong to.”
********The column lays out a spectrum of tribes, with corporate fundamentalists on the far right and corporate apostates on the far left. In between, moving from right to left, there are corporate toilers, corporate oracles, corporate kings, and corporate socialists. This is what it would look like without the modifier:
apostates socialists kings oracles toilers fundamentalists
According to the article, most Western firms are toilers that “believe in the primacy of shareholder value but are prepared to be more patient than the fundamentalists. From the standpoint of the invisible forces, the group of oracles is especially interesting, as they “want to maximise profits within the law, but with a twist. They think the law will evolve with public opinion and so they voluntarily do things today that they may be required to do tomorrow.” All in all, the article provides a useful perspective on the factors considered by corporate executives and boards in making decisions.
********In relation to this, the article “What to Expect from Trumponomics: Quick Take Scorecard” (https://www.bloomberg.com/politics/articles/2017-01-20/trumponomics-is-jawboning-by-another- name-quicktake-scorecard) is of some interest. The key sentence, as you will see, appears in the first paragraph: “Early in his first press conference as president-elect, Donald Trump said he would make pharmaceutical companies bid for U.S. business because they were ‘getting away with murder’ on drug prices. Indexes that track pharmaceutical stocks plummeted. It was classic Trump, doing what economists call ‘jawboning,’ or moving markets today with threats of action in the future” [italics added]. 163
(25 January 2017): “Mall Owners Rush to Get Out of the Mall Business” [SR](http://www.wsj.com/articles/mall-owners-rush-to-get-out-of-the-mall-business-1485262801)
------“Mall landlords are increasingly walking away from struggling properties, leaving creditors in the lurch and posing a threat to the values of nearby real estate. As competition from online retailers batters store owners, some of the largest U.S. landlords are calculating it is more advantageous to hand over ownership to lenders than to attempt to restructure debts on properties with darkening outlooks. That, in turn, leaves lenders with little choice but to unload the distressed properties at fire-sale prices.” Although the abandonment of such properties can negatively impact the creditworthiness of borrowers, this is not always the case. Regarding this Steven Marks, the head of the U.S. REIT group of Fitch Ratings, notes such defaults need not be negative: “If anything, we oftentimes view these transactions positively, as it indicates financial discipline to not commit corporate capital towards failing or uneconomic investments.”
********As the article notes, “In the case of a default, creditors make claims only on the collateral that backs the loan, not on the borrower itself.” Perhaps that is why (some) student loans are treated differently than mall loans—the lack of collateral. In the absence of a real asset to sell, students cannot walk away from the loan. Some former students die still owing on their loans.
********The article made me think about the topic of “recycling malls.” A couple of readers of the WSJ mentioned four possibilities: educational institutions, municipal (county or state) administration, offices, and housing. I’m sure there are others. What an interesting study it would be to see what is happening to these malls. A good place to start for ideas would be to sift through the Comments to this article.
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[The Invisible Forces Weekly: Economics with a Broader View] 302 (1 February 2017)
(26 January 2017): “What did NAFTA really do?” (http://rodrik.typepad.com/)
********This link takes you to the blog of Harvard University economist Dani Rodrik, which I found in the WSJ article “Nafta’s Net U.S. Impact Is Modest” [SR](http://www.wsj.com/articles/naftas- overall-u-s-impact-is-modest-1485469689). Rodrik provides a clear, research-based summary of NAFTA’s impact. You will need to scroll down a bit to read his post but it will be worth it. He notes, “So here is the overall picture that these academic studies paint for the U.S.” NAFTA produced large changes in trade volumes, tiny efficiency gains overall, and some very significant impacts on adversely affected communities.” In one of the studies he cites, by John McLaren and Shushanik Hakobyan, the largest impacts noted were in “parts of Georgia, North Carolina, South Carolina and Indiana.” The workers who were most adversely affected were “high school dropouts in industries that depended heavily on tariff protections in place prior to NAFTA. These workers saw wage growth drop by as much as 17 percentage points relative to wage growth in unaffected industries.”
(27 January 2017): “Homeowners’ Quest for the Best Schools” [SR](http://www.wsj.com/articles/homeowners-quest-for-the-best-schools-1485443381)
------“Houston lawyer Anne Ferazzi Hammett spent about three months last spring looking for a great high school for her teenage daughters, Anna and Nora. Then she discovered Westlake, a high school that gets top marks in academic rankings and draws strong reviews from parents. The only drawback: The school is located in Austin, Texas, about 165 miles northwest of the Hammetts’ home. Nonetheless, Ms. Ferazzi Hammett and her husband, Rick Hammett, bought a $2.25 million house in Westlake’s school district, and they and their daughters will move in June. . . . For some home buyers, there is no factor more important than the public schools their children will attend. They analyze student-body performance on standardized tests, school rankings, what percentage of alumni go on to four-year colleges and which schools send students to Ivy League or top-tier states universities. They then uproot their lives to move within these districts’ boundaries, where homes can cost hundreds of thousands of dollars more than nearby homes zoned to different schools.”
********No doubt the importance of public school quality is something that every realtor knows very well. The article goes on to note: “In an analysis of 1.6 million home listings in the U.S. through the first six months of 2016, Realtor.com found that houses in public-school districts with GreatSchools ratings of 9 or 10, the highest scores possible, were priced, on average, 77% higher than homes in nearby districts with scores of 6 or lower. Additionally, homes located in top districts sell four days faster—at 58 days—than the national median of 62 days.” Evidently, as the article also notes, people who move to a school district frequently move away from it after their children graduate.
********The GreatSchools ratings were new to me. You can learn more about them, and check out your area and schools, at: http://www.greatschools.org/. 165
(27 January 2017): “To Understand a Tax on Mexican Imports, Consider the Avocado” (https://www.nytimes.com/2017/01/27/business/economy/importers-tax-mexico.html)
********This article does a light run through of some of the consequences of a 20% tax on imported goods, taking the avocado as an example; “more than nine of every 10 imported avocados come from Mexico.” Avocados are the primary ingredient in guacamole, but onions are used, too; “seven out of eight onions eaten by Americans are grown in the United States.” This provides the reporter with an opportunity to explore how the import tax would affect the production of avocados in Mexico and the production of onions in the U.S. The analysis seems sound to me until the likely downward revision of the corporate income tax is taken up. Since this is a tax on profit, I do not see why it is at all likely that businesses will “share” their profits with consumers.
********Avocados and onions are interesting to think about. As the article points out, it takes four or five years for a newly planted avocado tree to bear fruit, so a U.S. avocado production response would take time. Onions, on the other hand, can be planted on an annual basis, so onion production could adjust within a year. When dealing with things that grow, production lags are common.
(27 January 2017): “Uneasy About the Future, Readers Turn to Dystopian Classics” (https://www.nytimes.com/2017/01/27/business/media/dystopian-classics-1984-animal-farm-the- handmaids-tale.html)
------Margaret Atwood’s The Handmaid’s Tale “is among several classic dystopian novels that seem to be resonating with readers at a moment of heightened anxiety about the state of American democracy. Sales have also risen drastically for George Orwell’s ‘Animal Farm’ and ‘1984,’ which shot to the top of Amazon’s best-seller list this week. Other novels that today’s readers may not have picked up since high school but have landed on the list this week are Aldous Huxley’s 1932 novel, ‘Brave New World,’ and Sinclair Lewis’s 1935 novel ‘It Can’t Happen Here.’ . . . The sudden prominence of such novels reflects a renewed public interest in decades-old works of speculative fiction as guides for understanding our current political moment.”
********The broader point of the article is that some (many?) are struggling to make sense of the changing landscape of politics and government in the U.S., and are turning to classic works of fiction to do so. It is interesting to think about political change translates into book sales (or a loss of book sales). A desire to understand is an important factor but so is whether one is a reader of books or not. My guess is that those who are struggling to make sense of the changing landscape are also readers of books, so the impact on demand of dystopian novels has been pronounced. In relation to this, I wonder has been the impact on books such as Trump: The Art of the Deal (https://www.amazon.com/Trump- Art-Deal-Donald-J/dp/0399594493/)? Almost 50% of presidential voters chose Donald Trump in the last election. What books would they be likely to buy in light of the election? Are there fictional works that come to mind or are they more likely to be focused on nonfiction works? 166
********JSTOR Daily has a related piece this week: “Friday Reads: George Orwell’s 1984” (https://daily.jstor.org/friday-reads-george-orwells-1984/). One of the foundation articles for it is “Crisis? Whose Crisis? George Orwell and Liberal Guilt.” The article notes that “Orwell was fixated on what he deemed ‘one of the more embarrassing moments in twentieth-century liberalism: the failure of middle-class liberals to connect with the working class.’”
(29 January 2017): “What are the best NC colleges to improve your financial future?” (http://www.newsobserver.com/news/business/article129415924.html)
------“The University of North Carolina released its strategic plan a couple weeks ago. Documents like this usually aren’t very exciting, but this one has far-reaching implications for our state. Included in the mix: a commitment to enroll more low-income and rural students and help them get all the way to graduation. And a pledge to keep the system affordable and accessible for qualified in-state high school students.” This commitment is important for the future of North Carolina because the state “has one of the lowest mobility rates in the country . . . [and education] is a proven way to” increase mobility. “To track how well colleges and universities are fostering upward economic mobility, The Equality of Opportunity Project recently release a Mobility Report Card. Using data from 30 million college students, the report looks at the distribution of family income when a student enrolls . . . and if students are able to ascend income brackets once they graduate.” In light of that data, “the universities that have the strongest track record in promoting upward mobility are Elizabeth City State, Winston- Salem State, North Carolina Central, Fayetteville State and North Carolina A&T, in that order.”
********Here are three websites, identified from a link in the article, that provide relevant information:
The Equality of Opportunity Project (EOP)) homepage: http://www.equality-of- opportunity.org/
The EOP page for colleges: http://www.equality-of-opportunity.org/college/
A tool developed by The New York Times to identify “Economic Diversity and Student Outcomes at America’s Colleges and Universities: Find Your College” (https://www.nytimes.com/interactive/projects/college-mobility/). Simply entire the college you are interested in the box near the headline.
A page that I found especially thought provoking was “Some Colleges Have More Students From the Top 1 Percent Than the Bottom 60. Find Yours” (https://www.nytimes.com/interactive/2017/01/18/upshot/some-colleges-have-more-students-from-the- top-1-percent-than-the-bottom-60.html). There is a box provided to add a school of interest to the list.
********The private benefits of higher education, of course, are only a part of the story—there are also public benefits. The Chronicle of Higher Education has a nice article this week that summarizes 167
the public benefits, which you can find at: http://www.chronicle.com/article/Beyond-the-College- Earnings/239013. The governmental recognition of the social benefits has long be a guiding element of higher education policy at least as long as the Morrill Act of 1862 (https://en.wikipedia.org/wiki/Morrill_Land-Grant_Acts), which gave rise to the many land-grant colleges and universities that dot the U.S. A data-filled and highly-graphical look at the impacts of higher education can be found in Education Pays 2016: The Benefits of Higher Education for Individuals and Society (https://trends.collegeboard.org/sites/default/files/education-pays-2016-full- report.pdf), by Jennifer Ma, Matea Pender, and Meredith Welch. It is a publication of The College Board (https://www.collegeboard.org/).
********A different kind of mobility—geographic mobility—is examined in “The academy and the marketplace: Mediocre academic researchers should be wary of globalisation” (http://www.economist.com/news/science-and-technology/21715639-effects-foreign-competition- professors-mathematics-mediocre-academic). In a “a forthcoming paper in the Journal of Human Resources, George Borjas of Harvard University, and Kirk Doran and Ying Shen of the University of Notre Dame, study the effects of globalisation on a select group of particularly brainy Westerners: professors of mathematics.” By examining the “natural experiment” that occurred with China’s liberalization in 1978, they found that the scholarly productivity of Chinese-American professors increased from the influx of Chinese students and “the relative productivity of non-Chinese American academics fell, as weaker papers were crowded out.” In an earlier paper Borjas and Doran examined the impact of the influx of Soviet mathematicians from the “abrupt collapse of the Soviet Union.” The increased supply of mathematicians in the U.S. led to increased unemployment among “newly minted American maths graduates.” Here are, what appear to be, the relevant paper and article:
“Ethnic Complementarities after the Opening of China: How Chinese Graduate Students Affected the Productivity of their Advisors” (http://www.nber.org/papers/w21096.pdf)
“The Collapse of the Soviet Union and the Productivity of American Mathematicians” (http://www3.nd.edu/~kdoran/Doran_Math.pdf)
I wonder if similar work has been done in relation to the scholars who fled Europe in the wake of the rise of Hitler.
********While we are on the subject of international labor markets, the piece “Brazilian Gang Enlists FARC Rebels for Drug Trade” [SR](https://www.wsj.com/articles/brazilian-gang-enlists-farc-rebels- for-drug-trade-1485858609). The negotiated peace between FARC and the Colombian government, which resulted in the 2016 Nobel Peace Prize (https://www.nobelprize.org/nobel_prizes/peace/laureates/2016/), has identified FARC members as attractive recruits for Brazil’s “largest criminal organization . . . the First Capital Command or PCC.” Vladimir Aras, who heads “the international cooperation unit of the Brazilian Prosecutor General’s Office,” notes that “The peace deal between Colombia’s government and the FARC is fantastic . . . But 168
it generates a side effect, which will be the idling of many FARC members.” In addition, some members of FARC “have opted out of the process altogether. Guerilla units in the lawless jungles of southeast Colombia, near the Brazilian border, have broken ranks with the FARC over the peace pact.” As is no doubt obvious, some members of FARC will conclude that they will be better off working for the PCC than in some alternative line of work.
********A very useful site identified by the article is InSight Crime: Investigation and Analysis of Organized Crime: http://www.insightcrime.org/. The site is global in its coverage.
(1 February 2017): “Saudi Arabia Plans the World’s Cheapest Power With Solar and Wind” (https://www.bloomberg.com/news/articles/2017-02-01/saudis-plan-1st-renewables-bids-with-world-s- lowest-power-cost)
********The title of this very brief article pretty much says it all. Saudi Arabia “plans to produce 9.5 gigawatts of power from renewable energy sources by 2023.” Evidently the country with the world’s second-largest proven oil reserves (https://en.wikipedia.org/wiki/List_of_countries_by_proven_oil_reserves), following Venezuela, is actively pursuing renewable energy.
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[The Invisible Forces Weekly: Economics with a Broader View] 303 (8 February 2017)
(2 February 2017): “One Tiny Widget’s Dizzying Journey Shows Just How Critical Nafta Has Become” (https://www.bloomberg.com/graphics/2017-trump-protectionism-alters-supply-chain/)
********This brief article shows the movement of a capacitor from its origins in Asia to the U.S., Mexico, and Canada. While doing so one can see how NAFTA and U.S. tax laws have influenced the many links in one supply chain.
(2 February 2017): “Full Employment May Be Redefined as Trump Attacks U.S. Benchmark” (https://www.bloomberg.com/news/articles/2017-02-02/full-employment-may-be-redefined-as-trump- attacks-u-s-benchmark)
********As the article points out and as is well known, the most frequently reported measure of unemployment, which is known by labor statistics professionals as U-3, has some problems, in particular, it doesn’t include “discouraged workers.” There are, in fact, six different unemployment measures—U-1 through U-2—that are regularly created and used by groups such as the U.S. Federal Reserve in making policy. The article provides a graph of three measures—U-3, U-5, and U-6—from 2008 through 2016, shown that their behavior over time are closely related. Measures U-1 through U- 6 are discussed in two publications:
“BLS introduces new range of alternative unemployment measures” (https://www.bls.gov/opub/mlr/1995/10/art3full.pdf)
“The Unemployment Rate and Beyond: Alternative Measures of Labor Underutilization” (https://www.bls.gov/opub/ils/pdf/opbils67.pdf)
Although not mentioned in the article, the money supply also has alternative measures which, like those for unemployment, are appropriate for different purposes. You can learn more about those measures—M1 and M2—at: https://www.federalreserve.gov/faqs/money_12845.htm.
(3 February 2017): “The End of Employees” [SR](https://www.wsj.com/articles/the-end-of- employees-1486050443)
------“Never before have American companies tried so hard to employ so few people. The outsourcing wave that moved apparel-making jobs to China and call-center operations to India is now just as likely to happen inside companies across the U.S. and in almost every industry. . . . The contractor model is so prevalent that Google parent Alphabet Inc., ranked by Fortune magazine as the best place to work for seven of the past 10 years, has roughly equal numbers of outsourced workers and full-time employees, according to people familiar with the matter. . . . The shift is radically altering what it means to be a company and a worker. More flexibility for companies to shrink the size of their employee base, pay and benefits means less job security for workers. . . . Some economists say the parallel workforce created by the rise of contracting is helping to fuel income inequality between 170
people who do the same jobs. . . . No one knows how many Americans work as contractors, because they don’t fit neatly into the job categories tracked by government agencies. Rough estimates by economists range from 3% to 14% of the nation’s workforce, or as many as 20 million people.” According to staffing executives, “Companies . . . are rapidly increasing the numbers and types of jobs seen as ripe for contracting. At large firms, 20% to 50% of the total workforce often is outsourced.”
********This is a very informative article that would be worth reading in its entirety—you may be able to if you search on its title. Steven Berkenfeld, an investment banker, “says companies of all shapes and sizes are increasingly thinking like this: ‘Can I automate it? If not, can I outsource it? If not, can I give it to an independent contractor or freelancer?” According to Berkenfeld, “very few jobs make it through that obstacle course.” And hiring an employee is “a last resort.” This is an interesting time to a labor economist or to be a department of Human Resources.
********This is a good place to notice The Sharing Economy: The End of Employment and the Rise of Crowd-Based Capitalism (https://www.amazon.com/Sharing-Economy-Employment-Crowd-Based- Capitalism/dp/0262034573), by Arun Sundararajan. You can read a review of the book at: http://www.chronicle.com/article/The-Sharing-Economy-Comes-to/238992. From what I can discern from the review, Sundararajan has a somewhat sunnier view of the changes in the labor market than the one suggested by the article in The Wall Street Journal.
(8 February 2017): “The Big Reason Whites Are Richer Than Blacks in America” (https://www.bloomberg.com/news/articles/2017-02-08/the-big-reason-whites-are-richer-than-blacks- in-america)
------A new study, “The Asset Value of Whiteness: Understanding the Racial Wealth Gap,” explodes standard explanations and solutions for the wealth gap.
The table of contents says it all:
• Attending college does not close the racial wealth gap. • Raising children in a two-parent household does not close the racial wealth gap. • Working full time does not close the racial wealth gap. • Spending less does not close the racial wealth gap. What does account for the racial wealth gap? This is a question still under investigation. However, “One powerful factor seems to be that whites are five times as likely as blacks to receive substantial gifts and inheritances, and the sums they get tend to be much larger.” The wealth advantage of whites’ and the blacks’ disadvantage “gets passed down from generation to generation.”
********The study mentioned in the article can be found at: http://www.demos.org/publication/asset- value-whiteness-understanding-racial-wealth-gap. (The link in the Bloomberg article that was supposed to take the reader to it did not work. This one does.) My understanding of the article is that 171
legal and political factors—the invisible foot—are the primary factors perpetuating the racial wealth gap.
(8 February 2017): “’A Conservative Climate Solution’: Republican Group Calls for Carbon Tax” (https://www.nytimes.com/2017/02/07/science/a-conservative-climate-solution-republican-group-calls- for-carbon-tax.html)
------“A group of Republican elder statesmen is calling for a tax on carbon emissions to fight climate change. The group, led by former Secretary of State James A. Baker III, with former Secretary of State George P. Shultz and Henry M. Paulson Jr., a former secretary of the Treasury, says that taxing carbon pollution produced by burning fossils fuels is ‘a conservative climate solution’ based on free- market principles. Mr. Baker is scheduled to meet on Wednesday with White House officials, including Vice President Mike Pence, Jared Kushner, the senior adviser to the president, and Gary D. Cohn, director of the National Economic Council, as well as Ivanka Trump. In an interview, Mr. Baker said that the plan followed classic conservative principles of free-market solutions and small government.”
********The proposal for the carbon tax, as well as additional related items, is a product of the Climate Leadership Council, about which you can learn more at: https://www.clcouncil.org/about-us/. The proposal is contained in “The Conservative Case For Carbon Dividends” (https://www.clcouncil.org/wp- content/uploads/2017/02/TheConservativeCaseforCarbonDividends.pdf). It is an impressive list of contributors, including economists Martin Feldstein and N. Gregory Mankiw among others. This eight-page document lays out “The Four Pillars of a Carbon Dividends Plan,” which are worth looking at and reflecting upon. This document is connected to a companion document of twenty-pages, “Unlocking the Climate Puzzle” (https://www.clcouncil.org/wp- content/uploads/2017/02/Unlocking_The_Climate_Puzzle.pdf), authored by Ted Halstead. Authors of “The Conservative Case” document are spreading the word in opinion pieces running in national newspapers, e.g., The New York Times (https://www.nytimes.com/2017/02/08/opinion/a-conservative- case-for-climate-action.html) and The Wall Street Journal [SR](https://www.wsj.com/articles/a- conservative-answer-to-climate-change-1486512334).
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[The Invisible Forces Weekly: Economics with a Broader View] 304 (15 February 2017)
(7 February 2017): “The ‘Slow-Motion Terrorism of Pirate Capitalism’” (https://www.bloomberg.com/news/articles/2017-02-07/glass-house-the-slow-motion-terrorism-of- pirate-capitalism)
------[A review, by Justin Fox, of Glass House: The 1% Economy and the Shattering of the All- American Town (https://www.amazon.com/gp/product/1250085802/), by Brian Alexander.] Glass House is the “melancholic but gripping account” of the author’s “13-month stay, from December 2014 to January 2016, in the troubled, drug-ravaged city” of Lancaster, Ohio, “where he grew up. There are tales of a heroin deal gone bad, an annual music festival fighting to survive, and people struggling to build a future in a place with a happier past. But it’s the Anchor Hocking saga at the heart of it all that makes this book more than another elegy for good times in Middle America.” In Alexander’s telling of the decline, but continued existence, of an iconic glass maker, what changed “wasn’t competition from Mexico or China—or at least not just that. ‘Corporate America is what happened,’ a local policeman tells the author. Alexander narrows that down, blaming it on ‘the slow-motion terrorism of pirate capitalism.’” The names of Carl Icahn, Newell, Cerberus Capital Management, and Monomoy Capital Partners figure in this story. Although “There are those who argue that leveraged acquisitions and restructurings of the sort that Anchor Hocking has endured make companies more efficient and steer capital to better uses. . . . Alexander makes a persuasive case . . . that from the perspective of Lancaster, it’s been one big fleecing.”
********This book looks like a good companion for Boom, Bust, Exodus: The Rust Belt, the Maquilas, and a Tale of Two Cities (https://www.amazon.com/Boom-Bust-Exodus-Maquilas- Cities/dp/0199765618), which I have read. The story of Boom, however, was one of decline in Galesburg, Illinois driven by Nafta. So, perhaps the story of Galesburg was also one of leveraged acquisitions and restructurings, a perspective I don’t recall from reading the book.
********Economic decline is, certainly, more complex than “just Nafta” or “just leveraged acquisitions.” This seems like a good place to lay out the distinction between “wicked problems” and “tame problems.” I ran across this distinction over the weekend while chasing down a sequence of links that led me to a post by media critic and journalism professor Jay Rosen. The specific post is “Covering Wicked Problems” (http://pressthink.org/2012/06/covering-wicked-problems/). Is the problem of economic decline in Galesburg, Illinois and Lancaster, Ohio a wicked problem? If it is, treating it as a monocausal tame problem will not lead to its solution. In drawing attention to wicked problems, I am reminded of the growing field of complexity economics, a relatively painless introduction for which is provided by Complexity and the Art of Public Policy: Solving Society’s Problems from the Bottom Up (https://www.amazon.com/Complexity-Art-Public-Policy- Societys/dp/0691169136/), by David Colander and Roland Kupers. 173
(8 February 2017): “Wonkblog: The business lobby’s hypocritical, one-size-fits-all answer to regulation: No” (https://wpo.st/zoHb2)
********Despite the title, this article make some general points that are worthy of consideration, discussing the role that cost-benefit analysis has played (is playing) in the analysis of federal regulation.
------A contentious aspect of the presidency of Ronald Reagan was his “executive order requiring the government to perform cost-benefit analyses for every federal regulation. The business community had long complained that government officials focused only on the benefits of regulation, while ignoring the costs to businesses and the economy as a whole. Liberal interest groups—unions, consumer advocates and environmentalists—went bananas. . . . Any estimates of the benefits of regulation, they argued, were too squishy and too subjective—and downright immoral. . . . Ironically, today it is the business lobby and its cheerleaders in the Republican Party who are the skeptics. They are only too happy to tote up every conceivable cost for those ‘crushing,’ ‘job-killing’ regulation, but resist toting up the benefits because—like the liberals of old—they view such estimates as too squishy and subjective.”
********The thrust of the article is to compare the “all benefit-no cost” approach once, supposedly, held by government officials, to the “all cost-no-benefit” approach now, supposedly, held by the business lobby, with the subjectivity, squishiness of the cost or benefit being ignored—effectively be set to zero—playing a pivotal role. This is all-too-easy to understand: stress what advances your argument and ignore what does not advance your argument. What is easy to understand, though, is not necessarily admirable. The article winds up with a valuable point, i.e., that cost-benefit analysis “really is squishy and it often relies on subjective assumptions, whether it is done by regulators who want to find huge benefits from regulations or industry executives who want to find none. That said, it is still [an] exercise . . . worth doing—not because of the precise answers it generates but because of the fact-based discipline it imposes on thinking about whether and how to regulate.”
********The use of costs and benefits in assessing federal regulation was put in place by Executive Order 12291, signed on 17 February 1981. You can learn more about it at: https://en.wikisource.org/wiki/Executive_Order_12291. There are five requirements set out in its Sec. 2. General Requirements. Most relevant to this article are:
(b) Regulatory action shall not be undertaken unless the potential benefits to society from the regulation outweigh the potential costs to society;
(c) Regulatory objectives shall be chosen to maximize the net benefits to society;
Here is one recent book that deals with cost-benefit analysis as applied to environmental regulation: https://www.amazon.com/Costs-Benefits-Environmental-Regulation/dp/1784712116/. 174
(9 February 2017): “Trump Wants More American Cars in Japan. Japan’s Drivers Don’t.” (https://www.nytimes.com/2017/02/09/business/trump-japan-american-cars.html)
------“Detroit pines for a day when the sight of an American car on a Japanese street is not so notable. Even as Japanese cars have taken a wide portion of the United States market, American brands are barely visible in Japan, a situation that has long frustrated American auto executives and trade negotiators and has become a renewed source of political friction under President Trump. . . . Such talk is alarming in Japan, where the auto industry is a pillar of the economy.” Few American cars are sold in Japan. “Of the nearly five million cars and light trucks sold in Japan last year, just 15,000 were American, or 0.3 percent.” Although trade barriers are sometimes advanced as a reason for the dearth of American cars sold in Japan, there are others. “Ingrained skepticism about American cars’ reliability and fuel efficiency is one problem. Another is price.” Supporting that notion is the fact that European brands like Mercedes-Benz and BMW have been relatively successful. Kenji Kobayashi, the executive director of the Japan Automobile Importers Association, sees “a difference between European and American efforts to woo Japanese car buyers. European brands advertise aggressively and have done more to customize their products for Japans, for instance by producing right-hand-drive versions of their vehicles—a seemingly obvious selling point, in a country where the driving lane is on the left, that American producers have long been criticized for ignoring.”
********The article makes clear that American cars, generally, do not have the product characteristics that Japanese consumers want, e.g., fuel efficiency, reliability, and relevance. The failure to advertise doesn’t help, of course, but perhaps there is no reason to do so given the situation. It is hard to avoid the conclusion that American automakers think that the Japanese market isn’t worth pursuing seriously. As it stands, the Japanese buyers of American cars, which are overwhelmingly men, are “a bit unusual.”
(10 February 2017): “The surprisingly heated political battle raging over the word ‘milk’” (https://wpo.st/xDHb2)
------“Chances are you’ve never stopped at your grocery store’s dairy case, baffled by the difference between ‘soy’ and ‘2%’milk. But the dairy industry says consumers are confused—and it’s launched a war to clarify the facts for them. Industry-backed bills in the House and Senate have recently sought to ban the makers of plant-based products from using the terms ‘milk,’ ‘cheese’ or ‘yogurt.’ . . . Now, as plant-based product sales continue to soar, Big Milk is ramping up its lobbying efforts against the companies that it says has misappropriated milks’ good name. And the fledgling plant-based food lobby—arguably the David to milk’s Goliath—has promised to do the same.”
********As the article notes, “The showdown between dairy and nondairy milks has been a long time coming. Consumption of conventional milk has been cratering since the 1950s, a product of both modern concerns about fat and the explosion of consumer beverage options after . . . World War II.” As we know, as the number of substitutes for a product increases, the demand for the product of the 175
substitutable good will decrease, all other things being equal. Dairy producers, presumably, believe that the removal of the word ‘milk’ will make products like almond milk and soy milk seem like poorer substitutes for the real thing, thereby increasing the demand for “real” milk. Non-dairy producers, presumably, have beliefs that are somewhat similar, although affecting the demand for their products in the opposite direction.
(15 February 2017): “Is the Chicken Industry Rigged?” (https://www.bloomberg.com/news/features/2017-02-15/is-the-chicken-industry-rigged)
------In a December 2016 earnings call, Sanderson Farms CEO Joe Sanderson reassured bank analysts “that the company’s recent profits weren’t about to disappear, as the chicken industry’s usual business cycle dictated they would.” But Sanderson told them “that the industry had learned from its mistakes. There wouldn’t be a bust this time. Then he said something rather extraordinary: His competitors weren’t planning to ramp up production. He knew this because it had been communicated to him by a virtually unknown company. ‘I see a lot of information from Agri Stats the tells me nobody’s going to ramp up’ . . . Sanderson was right. The following year, Sanderson Farms reported that its profits had surged 64 percent. For the next six years, production cuts and skyrocketing profit margins were the norm in the $90 billion chicken.” Although “puzzled industry watchers . . . speculated that a merger spree during the 1980s and 1990s were responsible” for increased profit margins, “Sanderson’s conference call suggested another source for the shift: Agri Stats, a private service that gathers data from poultry processors, produces confidential weekly reports, and disseminates them back to companies that pay for prescriptions.” Access to highly detailed data about “the internal operations of the nation’s biggest poultry operations, including bird sizes, product mixes, and financial returns at participating plants” is very unusual. Agri Stats “gathers information from more than 95 percent of U.S. poultry processors.” Minneapolis law firm Lockridge Grindal Nauen has “filed a class-action lawsuit against more than a dozen of the nation’s largest chicken companies, alleging that they colluded to inflate chicken prices from 2008 to 2016. . . . The suit says that Agri Stats “acted as an agent and/or co-conspirator” of the defendants.
********Agri Stats (http://www.agristats.com/) was founded by Jim Cox, who was born in the Great Depression, in 1985. The broad outline of his early years is related in the article; Cox worked up to 80 hours a week on a dairy farm while paying his way through Purdue University. The article shows convincingly the value of highly detailed production information, information that Agri Stats is now trying to bring to hog production. Three more things caught my attention:
• Clients of Agri Stats “submit their sales invoices in real time—when someone sells a truck of chicken to the Kroger grocery chain, for example, the invoice goes to Agri Stats soon after.”
• Then there is the influence of industry analysts. When veteran stock analyst Timothy Ramey of Pivotal Research Group “downgraded shares of Tyson from ‘buy’ to ‘sell’ and 176
slashed his valuation of the company shares” in the wake of the filing of the lawsuit, Tyson issued a statement dismissing his speculations on the same day. Nonetheless, “its stock fell about 9 percent that day.” Since his note, the “company’s stock is down 12 percent.”
• Finally, there is the judgment of University of Wisconsin law professor Peter Carstensen, who notes that: “Getting detailed information is a particularly useful form of collusion . . . because it allows conspirators to make sure they’re all following through on the agreement.” Having this kind of information generates trust that firms are not cheating.
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[The Invisible Forces Weekly: Economics with a Broader View] 305 (22 February 2017)
(16 February 2017): “Trump Hates Trade Deficits, But Which Ones Really Matter?” (https://www.bloomberg.com/graphics/2017-mexico-trade-deficit/)
********This article provides a clear, graphically-based discussion of U.S. trade deficits and surpluses with a variety of its trading partners. It provides information about imports, exports, and deficits/surpluses in relative terms for a variety of U.S. trading partners. Surprisingly, the U.S. runs its largest relative deficit with Ireland (65%), followed by China (60%); the relative deficit with Canada is 2% and the relative deficit with Mexico is 12%. The U.S. runs its largest relative surplus with the Netherlands (42%).
********Aggregate figures only tell a part of the story. Here are two articles that provide a more personal view:
“What happened when factory jobs moved from Warren, Ohio, to Juarez, Mexico” (http://www.latimes.com/world/mexico-americas/la-fg-mexico-us-factories-20170217- htmlstory.html). The article contains an eight-minute video which includes the voices of a worker in Warren who lost his job at Delphi and a worker in Juarez who now works for Delphi.
“With NAFTA in Trump’s crosshairs, Mexico’s border factories brace for the unknown” (https://wpo.st/G-Jd2). The relationships between El Paso, Texas and Ciudad Juarez, Mexico will likely change should NAFTA be renegotiated. Mattress manufacture provides an example.
Now that I think of it, I can’t recall having seen or read one article on cross-border movements of businesses between the U.S. and Canada in relation to NAFTA. Why has there been an almost exclusive focus on movements between the U.S. and Mexico?
(17 February 2017): “How Economists are Fueling the Global Debate Over Refugees” (https://www.bloomberg.com/news/articles/2017-02-17/how-economists-are-fueling-the-global- debate-over-refugees)
********Reporter Michelle Jamrisko reviews and provides links to “A host of studies” that “aim to quantify how these outsiders integrate and impact the native born.” If you are seeking a broad overview, but not a tidy summary, on the economic impacts of refugees, this is a good place to look.
(19 February 2017): “A Bee Mogul Confronts the Crisis in His Field” (https://www.nytimes.com/2017/02/16/business/a-bee-mogul-confronts-the-crisis-in-his-field.html)
------California-based Bret Adee “is America’s largest beekeeper, and this is his busy season.” He has some “92,000 hives” that he rents out to provide bee pollination services across the United States. Right now, his bees are focused on California’s almond trees. Those services go for “$180 to $200 a hive . . . There would be no almond crop—not to mention avocados, apples, cherries and alfalfa— 178
without honey bees. Of the 100 crops that account for 90 percent of the food eaten around the globe, 71 rely on bee pollination.” Colony collapse is an issue for Mr. Adee, as it is for virtually all bee keepers. In the year “that ended in April 2016, 44 percent of the overall commercial bee population died.” Although neonicotinoids have been implicated in colony collapse, it is generally thought that there are other factors at work, too.
********A nice, contextualized story about honeybee colony collapse. This is a bit different than usual because it focuses more on the perspective of bee keepers and what they are going through. There is a real and growing demand for the services provided by large-scale bee keepers and some of them are meeting that demand by purchasing the bees of smaller producers who see no future in the business.
(22 February 2017): “Kenneth Arrow, Nobel-Winning Economist Whose Influence Spanned Decades, Dies at 95” (https://www.nytimes.com/2017/02/21/business/economy/kenneth-arrow-dead- nobel-laureate-in-economics.html)
********Kenneth Arrow, who won the Nobel Prize in Economics in 1972, passed away Tuesday after a long and fruitful career. The particulars for his Nobel Prize, which he shared with John R. Hicks, can be found at: https://www.nobelprize.org/nobel_prizes/economic-sciences/laureates/1972/arrow- facts.html. An overview of his work can be found at: https://en.wikipedia.org/wiki/Kenneth_Arrow. Arrow is one of the new economists who could have received multiple Nobels in economics had that been possible, his work was that influential and path breaking. If I had to pick just one publication, however, as reflective of his importance, it would have to be Social Choice and Individual Values (https://www.amazon.com/Social-Choice-Individual-Values-Kenneth/dp/1614273456/), which was published in 1951. By mathematically proving that individual preferences could lead to social preferences only under extremely repugnant conditions, i.e., dictatorship, his “Impossibility Theorem” shattered the dreams and redirected the thought of many who sought a firm basis for social decisions.
(22 February 2017): “How to Save a Dying Mall” (https://www.bloomberg.com/news/articles/2017- 02-22/how-to-save-a-dying-mall)
------The Hull Property Group of Savannah, Georgia “has spent the last decade bringing distressed malls back to life. The company, which owns 29 malls across the U.S., sticks to a proven script that includes negotiating tax incentives with local governments, demolishing excess space, and reversing public perceptions that the property is struggling.” Hull is “one of a small crowd of operators bucking the conventional wisdom that there are simply too many malls and that only those catering to wealthy shoppers will survive the death of legacy retailers.” As one developer notes, if you can buy a mall “at 20 cents on the dollar, you can provide tenants with very profitable stores, because you can give them cheap rents.”
********The challenge of repurposing distressed malls fascinates me but one of the links of the article clearly indicates that it is a part of the more general problem of “distressed properties,” including such 179
things as “landfills and abandoned chemical plants.” Brownfield Listings (https://brownfieldlistings.com/) provides access to a list of distressed properties from across the U.S. The listings can be searched by a variety of criteria (https://brownfieldlistings.com/search/moresearchoptions), including location. For example, I search on North Carolina and a city-owned property of Asheville, North Carolina popped up! Would you like to buy a brownfield property on Hilliard Avenue in Asheville? I was especially intrigued by the Property Status criterion. I wasn’t aware that, in addition to brownfields, there are also greyfields, greenfields, and redfields, among others.
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[The Invisible Forces Weekly: Economics with a Broader View] 306 (1 March 2017)
(23 February 2017): “A.T.F. Filled Secret Bank Account With Millions From Shadowy Cigarette Sales” (https://www.nytimes.com/2017/02/22/us/alcohol-tobacco-firearms-cigarettes-millions-secret- bank-account.html)
------“Working from an office suite behind a Burger King in southern Virginia, operatives used a web of shadowy cigarette sales to funnel tens of millions of dollars into a secret bank account. They weren’t known smugglers, but rather agents from the Bureau of Alcohol, Tobacco, Firearms and Explosives. The operation, not authorized under Justice Department rules, gave agents an off-the- books way to finance undercover investigations and pay informants without the usual cumbersome paperwork and close oversight, according to court records and people close to the operation. The secret account is at the heart of a federal racketeering lawsuit brought by a [Raleigh, North Carolina- based] collective of farmers who say they were swindled out of $24 million. . . . The scheme relied on phony shipments of snack food disguised as tobacco. The agents were experts: Their job was to catch cigarette smugglers, so they knew exactly how it was done.”
********The Raleigh-based collective is the U.S. Tobacco Cooperative (http://www.usleaf.com/about/), which is “made up of about 700 tobacco farmers—from Virginia to Florida.” As the article notes, “The basics of cigarette smuggling are simple. Each state sets its tobacco taxes. Buying cigarettes in low-tax states, like Virginia, and secretly selling them in higher- tax states, like New York, generates large profits. More complicated schemes have shipped cigarettes to Indian reservations, where they are not taxed, they rerouted them for sale on the black market.” As this article clearly illustrates, legal walls constructed around geographic areas frequently provide opportunities for smuggling. Goods and services will tend to move toward the location of greatest value, whether the activity is legal or not.
(23 February 2017): “California Farmers Are Bulldozing Their Vineyards, As Appetite for Raisins Shrivels” [SR](https://www.wsj.com/articles/california-raisins-sing-the-blues-1487768402)
------“California grapes fill America’s extra-large wine glasses, but 30 years ago they were most famous for spawning celebrity raisins. Today, farmers in California’s Central Valley are ripping up tens of thousands of acres of vines, as Americans’ appetite for the dried fruit has waned. Countries like Turkey and Iran have flooded the global raisin market with cheaper products. Meanwhile, the increasingly upscale U.S. wine market is no longer as hot on the region’s grapes.” In Selma, California, “a place that is called the world’s raising capital, growers are bulldozing vineyards and planting almonds and pistachios, which bring a higher return. . . . Many who can’t afford the reboot are choosing to sell off their land. Today 165,000 acres in the Central Valley are planted in raisin grapes, down from a high of 280,000 in 2000. Farmers pulled up 34,000 acres of vines between the 2015 and 2016 harvests, according to Allied Grape Growers.” 181
********Although this article hides behind a pay wall, there is a five-minute video that is accessible. It features a spokesman for the raisin industry as well as a grape grower who is faced with ripping out his vines and replacing them with, perhaps, almond trees. Here we see the impact of relative prices on land utilization. I wonder if the recent lessening of drought conditions in California will affect the “rebooting” that is underway?
(25 February 2017): “Clean energy’s dirty secret: Wind and solar power are disrupting electricity systems” (http://www.economist.com/news/leaders/21717371-thats-no-reason-governments-stop- supporting-them-wind-and-solar-power-are-disrupting)
********This is one of the leaders for the week. It is accompanied by the longer (but not long) briefing “Renewable energy: A world turned upside down” (http://www.economist.com/news/briefing/21717365-wind-and-solar-energy-are-disrupting-century- old-model-providing-electricity-what-will). Both the leader and the briefing expand upon the challenges that the increasing use of (intermittent) renewable energy sources are creating for grids, energy markets, and energy market regulations that were devised for energy sources that were (are) more centralized and largely not intermittent. Since renewable energy will be comprising an ever- growing part of the energy portfolio going forward, it is best that we figure out how to deal with them, through appropriate tweaking of the invisible forces. No doubt changes in economic, legal and political, and social and historical factors will all be needed.
(25 February 2017): “The future of forever: A report from De Beer’s new diamond mine” (http://www.economist.com/news/international/21717369-production-worlds-most-valuable-gem-may- be-about-peak-report-de-beerss)
------The world’s largest diamond company, De Beer’s, “marked the opening of its Gahccho Kué mine in September” in the Northwest Territories of Canada. This is the “biggest new mine in the world in over a decade. De Beers has no plans for another.” Although De Beers remains the world’s biggest diamond producer by value, it now accounts “for only a third of global sales, down from 45% in 2007.” In addition to additional competitors for natural diamonds, “It faces many uncertainties, from synthetic diamonds to changing relationships with polishers and cutters.” Furthermore, “the source of the demand that drives sales—the link between diamonds and love—looks weaker than it used to. But one forecast seems solid: there will be fewer new diamonds. De Beers continues to seek new places to mind, but has slashed its exploration budget. Another big find is unlikely. The supply of new diamonds is expected to peak in the next few years, before beginning a slow decline.”
********This article provides a clear overview of the market for diamonds. Of particular interest to me was its brief description of the role that advertising played in managing the demand for diamonds. In 1938, as noted in the article, De Beers hired the New York-based advertising agency N.W. Ayer “to coax Americans to buy more rocks. It dreamed up the notion that a diamond ring should be an essential display of love and status, its gift a rite of passage. In the ensuing decades De Beers and its 182
marketers penned slogans—memorably, ‘a diamond is forever’—and invented social rules, urging men to spend two months’ pay on a gift for their affianced.” (I wasn’t aware of the two-months rule. Here is a brief note about it: http://www.goodhousekeeping.com/life/money/a32609/two-months-salary- engagement-ring-rule-origin/.)
********The article provides a nice example of the role that advertising can play in creating a want. In an introductory economics course, for example, one would typically distinguish between two aspects of advertising: information provision and persuasion. Want creation (or expansion) would be an example of persuasive advertising at work. That persuasive advertising would give rise to a greater demand for the product advertised. When coupled with a company like the historic De Beers, which held a near-monopoly in production and distribution for many years, this could lead to significant and lasting profits.
********As another example of the significance of persuasive advertising, I am reminded of the book The Gunning of America: Business and the Making of American Gun Culture (https://www.amazon.com/Gunning-America-Business-American-Culture/dp/0465048951/), by Pamela Haag. It focuses, but not exclusively, on the Winchester Repeating Arms Company, which was one of the first gun makers to make intentional and extensive use of interchangeable parts to make guns. As its output increased, its founder Oliver Winchester became increasingly aware that the war- based demand for guns was highly variable and unreliable for the extensive and constant production of guns. His answer was to set out to create a substantial consumer demand for guns. It is this consumer demand that helped result in an “American gun culture” noted in the title of the book. An interesting aspect of the book is its discussion of the life and house-building activities of daughter-in-law Sarah Winchester, which resulted in what is now known as the Winchester Mystery House (https://www.amazon.com/Captive-Labyrinth-Winchester-Heiress-Fortune/dp/0826219837/).
(28 February 2017): “Real Cork Is Fighting Back Against Screwcaps” (https://www.bloomberg.com/news/articles/2017-03-01/sunken-champagne-gives-amorim-armor-in- great-stopper-debate)
------177 years ago, a ship sank in the Baltic Sea with 162 bottles of champagne. When the bottles were salvaged, 79 bottles were still drinkable, a testimony to the quality seal provided by real cork stoppers. This was good news to cork producers, which are primarily located in Portugal, as the traditional cork stopper has been losing market share to screw tops and synthetics in the wine closure market. Screw tops and synthetics avoid the so-called “corked” taste of wines caused by contaminated corks. Major cork producer Corticeira Amorim claims that it is the “first cork company to produce a taint-free natural cork stopper, a laborious process that requires all of the corks to be individually screened on the production line to eliminate the risk of contamination. The new NDtech corks are currently used in icon and ultra-premium wines but the company’s goal is to scale up production in coming years to supply most of the wine industry.” 183
********So, even such an item as the cork wine stopper is subject to innovation. The source of “cork taint” is the chemical Trichloroanisole (TCA). Too much of it gives rise to a musty flavor, as noted by The Wine Institute (https://www.wineinstitute.org/initiatives/issuesandpolicy/tca). You can learn more about the NDtech cork and how it protects wine from excessive TCA at: http://www.amorimcork.com/en/products/ndtech/. I am amazed that “NDtech individually tests each wine cork for TCA.” It does this “using unprecedented fast chromatography technology.” The machine can “analyse each cork in seconds.”
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[The Invisible Forces Weekly: Economics with a Broader View] 307 (8 March 2017)
(2 March 2017): “Why Do We Have ‘Free Trade’ For Televisions, But Not For Corn?” (https://daily.jstor.org/why-do-we-have-free-trade-for-tvs-but-not-for-corn/)
********In this post, Livia Gershon summarizes an argument developed by Judith Goldstein in “The Impact of Ideas on Trade Policy: The Origins of U.S. Agricultural and Manufacturing Policies” in 1989. Simply put, Goldstein’s argument is that the post-WWII economic boom “froze” the economic policies in place at that time, i.e., policy makers embracing a post hoc, ergo propter hoc argument (https://en.wikipedia.org/wiki/Post_hoc_ergo_propter_hoc). The policies that were “frozen” were those that resulted from attempts to deal with the Great Depression and the Smoot-Hawley Tariff Act of 1930 (https://en.wikipedia.org/wiki/Smoot%E2%80%93Hawley_Tariff_Act), the latter of which “raised U.S. tariffs on over 20,000 imported goods.” The National Recovery Administration adopted extensive government regulation in both the agricultural and industrial sectors. However, the differential treatment of them resulted “not in the objective results of intervention in the two industries but in the way experts looked at the problem. Agriculture, having been stressed even before the Depression, seemed more fundamentally in need of help.” In short, this article provides a valuable look at how the policy ideas of experts have affected economic regulation. Goldstein appears to develop these ideas more extensively, including over a longer time period, in her 1994 book Ideas, Interest, and American Trade Policy (https://www.amazon.com/Interests-American-Cornell-Studies- Political/dp/0801499887/).
********The mention of the views of experts reminded me of a recently published book: “Escape from Democracy: The Role of Experts and the Public in Economic Policy (https://www.amazon.com/Escape-Democracy-Experts-Public-Economic/dp/1316507130/), by David Levy and Sandra Peart. I have not read the book but it does seem to provide a historically-based examination of the role of experts and the role of democracy in the development and execution of policy ideas. Their arguments are surely worthy of consideration.
(3 March 2017): “How Uber Deceives the Authorities Worldwide” (https://www.nytimes.com/2017/03/03/technology/uber-greyball-program-evade-authorities.html)
********Uber has been in the news a lot of late and not in good ways. Its so-called “Greyball” program is one of those ways. According to the article, Greyball “uses data collected from the Uber app and other techniques to identify and circumvent officials who were trying to clamp down on the ride-hailing service.” This use seems to have grown out of Uber’s development of a tool to monitor any “violation of terms of service.” In the article an example of given of the attempt by an employee of Portland, Oregon to call an Uber ride in a “sting operation against the company.” Evidently the Greyball program had identified this employee as a potential problem and “served up a fake version of the app.” The result was that the sting failed. This does seem to be, in some sense, akin to the use of radar detectors to evade speed traps. But, as Wayne State University law professor Peter Hennings 185
notes, “With any type of systematic thwarting of the law, you’re flirting with disaster . . . We all take our foot off the gas when we see the police car at the intersection up ahead, and there’s nothing wrong with that. But [Uber’s use of Greyball] . . . goes far beyond avoiding a speed trap.” This is simply the latest cat-and-mouse game between those who would entrap and those who do not wish to be trapped.
********While we are on the subject of taxi-like transportation, it turns out that taxi drivers will take advantage of the information asymmetry of its riders. This is explored briefly in “Moral hazard: Taken for a ride” (http://www.economist.com/news/finance-and-economics/21717842-if-service-provider- knows-someone-else-paying-your-bills-he-more-likely). As it turns out, “The most common form of overcharging was not, as might be expected, taking a longer route.” Rather, the overcharging, since riders do care about time, was in the form of “bogus surcharges (a fee for airport pickup, for example), or charged the night-time fare in the daytime.”
(4 March 2017): “The Disturbing New Facts About American Capitalism” [SR](https://www.wsj.com/articles/the-disturbing-new-facts-about-american-capitalism-1488580706)
------“New research by economists Gustavo Grullon of Rice University, Yelena Larkin of York University and Roni Michaely of Cornell University argues that U.S. companies are moving toward a winner-take-all system in which giants get stronger, not weaker, as they expand.” This runs counter to the commonly expressed view that, in capitalism, “as companies get big, they become fat and happy, opening themselves up to lean and hungry competitors that can underprice and overtake them.” According to the authors “The U.S. had more than 7,000 public companies 20 years ago . . . nowadays, it’s fewer than 4,000.” Profitability of the largest companies has increased, too, as well as profit margins.
********The paper by the economists appears to be “Are US Industries Becoming More Concentrated” (https://papers.ssrn.com/sol3/papers.cfm?abstract_id=2612047), which was last revised on 26 February 2017. The question is, of course, why has concentration increased? According to the paper’s Abstract, the authors propose that “lax enforcement of antitrust regulations and increasing technological barriers to entry appear to be important factors behind this trend, resulting in weakened competition.” Globalization might also be a part of the story;. (Note: I haven’t read the paper.) Perhaps businesses have had to get bigger to compete on a global scale.
********Jason Zweig, who wrote this piece, is the columnist for “Weekend Investor.” In his column he notes how this information could have been used to guide investing in the stock market. The strategy relies upon the number of firms in a given industry and the value of the eponymous Herfindahl-Hirschman Index (https://en.wikipedia.org/wiki/Herfindahl_index).
(8 March 2017): “Who’s to Blame for the Trucker Shortage?” [SR](https://www.wsj.com/articles/whos-to-blame-for-the-trucker-shortage-1488898803) 186
------“In 2015, American Trucking Associations [ATA] estimated that for-hire trucking companies had nearly 50,000 fewer drivers than they needed. The shortage was less severe in 2016, but the trade group expects it to worsen in coming years. As policy makers wring their hands over the shortage, an Ivy League sociologist who spent time as a long-haul driver says the deficit is largely the industry’s own doing.” Although the ATA “largely blames the grueling demands of a job that puts workers on the road for long periods[,]” sociologist Steve Viscelli, the author of The Big Rig: Trucking and the Decline of the American Dream, “says the shortage is the product of an industry labor model that relies heavily on inexperienced drivers and independent contractors.” Owner-operators of big rigs “are attracted by promises of being their own bosses, but the arrangement often saddles them with unsustainable debt and high expenses.” Wages for drivers have been rising in recent years and signing bonuses are being used, too. “Such measures helped bring down industrywide turnover from nearly 100% in 2012 to just over 90% in 2014. More recently, driver turnover has declined to around 80% due to less freight being shipped.”
********You can learn more about Viscelli’s book at: https://www.amazon.com/gp/product/0520278127/. No doubt the Department of Transportation, under the leadership of Elaine Chao (https://en.wikipedia.org/wiki/Elaine_Chao), will play a role in the number of truckers and their quality of life. The U.S. DOT website (https://www.transportation.gov/) provides information on the various transportation modes in the U.S.
********No doubt the regulation of U.S. transportation will be one area where a reconsideration of the scope and nature of regulation will be reconsidered in the Trump administration. This week The Economist shared its thoughts on this subject, first in a leader, “Red tape in America: Doing regulation right” (http://www.economist.com/news/leaders/21717815-america-needs-regulatory-reform-not- crude-cull-environmental-rules-right-way-get-rid), and then in its companion article, “Regulation: Grudges and kludges” (http://www.economist.com/news/united-states/21717838-republicans-and- democrats-have-been-equally-culpable-adding-rulebook-too-much).
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[The Invisible Forces Weekly: Economics with a Broader View] 308 (15 March 2017)
(8 March 2017): “Big Tobacco Has Caught Startup Fever” (https://www.bloomberg.com/news/features/2017-03-08/big-tobacco-has-caught-startup-fever)
------Big Tobacco, specifically Phillip Morris International Inc. and Reynolds American Inc., are working hard to bring technology to bear on nicotine delivery, thereby producing a relatively safer product and appealing to tech- and design-oriented college graduates, too. Previously relatively few grads were looking to sign on at companies that produce a product that is estimated to kill, according to the CDC, “almost 500,000 people a year.” Supporting this development is a new perspective. “Tobacco executives often sound like media-owners talking about content. That is, they’re open to delivering their drug via whatever pipe the consumer chooses—be it e-cigarettes, hear-not[burn devices, gum, lozenges, dip, or some medium that hasn’t been invented yet. They are, as the media gurus would say, ‘platform-agnostic.’”
********A fascinating article that shows some of the many “pipes” that tobacco companies, perhaps it might be better to say nicotine-delivery companies, are developing for consumers. A product featured in the article is IQOS, which employs tobacco and heat-not-burn technology that is described as a “modified risk” product. You can learn more about IQOS and the sister-product TEEPS at: https://www.pmi.com/science-and-innovation/heated-tobacco-products.
********Regulatory oversight in the area of alternative nicotine-delivery products is relatively new. “All tobacco products released after 2007—including e-cigarettes—must now seek the . . . [FDA’s] permission to remain on store shelves.” In relation to this, “Jan Verleur, co-founder and CEO of VMR Products LLC, owner of V2, the largest independent e-cigarette brand in the U.S. accuses the FDA of becoming ‘the handmaiden of Big Tobacco.’ He estimates that going through the approval process will cost his company from $300,000 to $1 million per product. That’s more, he says, than most independent vaping companies can afford.” He goes on to note, “A higher barrier to entry to bring new technology to market in the sector is a very, very good thing for Big Tobacco.” We see, then, as small organic food growers have commented, the costs associated with attaining certification or regulatory approval, will make an industry less competitive. Larger firms, generally, will be better able to “foot the bill” required to enter the market. Best of all, of course, is the practice of increasing the barriers once market entry has ben gained.
(9 March 2017): “Upgrade your jail cell—for a price” (http://www.latimes.com/projects/la-me-pay-to- stay-jails/)
------“In what is commonly called ‘pay-to-stay’ or ‘private jail,’ a constellation of small city jails—at least 26 of them in Los Angeles and Orange counties—open their doors to defendants who can afford the option. But what started out as an antidote to overcrowding has evolved into a two-tiered justice system that allows people convicted of serious crimes to buy their way into safer and more comfortable jail stays. . . . Pay-to-stay jail assignments involve only a small fraction of the tens of thousands of 188
inmates sent to detention centers in Southern California each year. But allowing some defendants to avoid the region’s notoriously dangerous county jails has long rankled some in law enforcement who believe it runs counter to the spirit of equal justice.” Pay-to-stay prices vary, “with each city setting its own rate. Defendants can get a bargain-basement bed in La Verne for $25 a night or pay a modest $75 a night in Hawthorne. Or they can splurge, paying $198 a night in Redondo Beach of $251 a night in Hermosa Beach.”
********Evidently pay-to-stay has been in use in California for some time, as The New York Times published an article on in it in 2007 (http://www.nytimes.com/2007/04/29/us/29jail.html). There is a bit more general information about pay-to-stay in Wikipedia (https://en.wikipedia.org/wiki/Pay-to- stay_(imprisonment)), which includes a link to a 24-page study done by the ACLU of Ohio in 2015 (http://www.acluohio.org/wp-content/uploads/2015/11/InJailInDebt.pdf). My sense is that there is some fluidity to the practice of pay-to-stay. The California practice seems to be like “if you want to stay in our jail, you will pay this fee, whereas the practice described in Ohio seems to be more like “you are in our jail and you will pay a fee.” Both practices raise justice issues. A more scholarly look at this subject is “Paying for Your Time: How Charging Inmates Fees Behind Bars May Violate the Excessive Fines Clause” (https://www.brennancenter.org/analysis/paying-your-time-how-charging- inmates-fees-behind-bars-may-violate-excessive-fines-clause).
********This is probably as good a time as any to make notice of Locked In: The True Causes of Mass Incarceration and How to Achieve Real Reform (https://www.amazon.com/Locked-Causes- Incarceration-Achieve-Reform/dp/0465096913/). This might well be viewed as a companion to Michelle Alexander’s book The New Jim Crow: Mass Incarceration in the Age of Colorblindness (https://www.amazon.com/New-Jim-Crow-Incarceration-Colorblindness/dp/1595586431/). My attention was drawn to Locked In through a review in The Wall Street Journal [SR](https://www.wsj.com/articles/the-prosecutors-prison-state-1489356145). In Pfaff’s view, politicians and prosecutors bear much of the blame for exploding prison populations; politicians pass draconian laws and prosecutors want political careers that show them to be tough on crime. A brief review of the book can be read at: https://www.kirkusreviews.com/book-reviews/john-pfaff/locked-in- true-causes/.
(9 Marcy 2017): “More Men Are Taking ‘Women’s’ Jobs, Usually Disadvantage Men” (https://www.nytimes.com/2017/03/09/upshot/more-men-are-taking-womens-jobs-at-least-certain- men.html)
------“Even as women moved into men’s jobs, in fields like medicine, law and business, men did not flock to the lower-status jobs that women mostly did. That’s changing. Over the last 15 years, according to a new study, men have been as likely to move into predominantly female jobs as the other way around—but not all men. It’s those who are already disadvantaged in the labor market: black, Hispanic, less educated, poor and immigrant men. While work done by women continues to be valued less, the study demonstrates, job opportunities divide not just along gender lines but also by race and 189
class.” The women who are making “inroads into more prestigious male-dominated professions in that period are likely to be white, educated, native-born and married, according to the [unpublished] research.”
********The authors of the study are Patricia A. Roos, a Rutgers University sociologist, and Lindsay M. Stevens, “a sociology doctoral student there.” Evidently the gist of this research is not new. “Race, ethnicity and gender have always contributed to who does what work. Women have typically entered occupations when men find better ones, and immigrants have filled the ones women left behind. In the 1800s, according to previous research by Ms. Roos and Barbara Reskin of the University of Washington, Irish men replaced native-born white women in textile mills. The women moved to middle-class jobs like teaching—which native-born white men were leaving.” To me the importance of this article stems from a point that has been made repeatedly in the news the last few weeks, i.e., the importance of looking below the broad categories of class and region to the underlying characteristics of people who make them up. It is misleading at best and dangerous at worst to speak about all members of a group like class as being “the same” in some sense. This is not a new idea but one that must continually be surfaced in our discussions of current events and policies.
(11 March 2017): “Behind the Quiet State-by-State Fight Over Electric Vehicles” (https://www.nytimes.com/2017/03/11/business/energy-environment/electric-cars-hybrid-tax- credits.html)
------“Today, the economic incentives that have helped electric vehicles gain a toehold in America are under attack, state by state. In some states, there is a move to repeal tax credits for battery-powered vehicles or to let them expire. And in at least nine states, including liberal-leaning ones like Illinois and conservative-leaning ones like Indiana, lawmakers have introduced bills that would levy new fees on those who own electric cars. That state actions could put the business of electric vehicles, already rocky, on even more precarious footing.”
********The article relates a plethora of proposed and actual tax, fee, and regulatory changes by states, and some by the federal government, that are likely to affect the demand for electric vehicles. Electric cars (and marijuana) are subject to extensive invisible-foot risk.
(14 March 2017): “Should Agencies Decide Law? Doctrine May Be Tested at Gorsuch Hearing” (https://www.nytimes.com/2017/03/14/business/dealbook/neil-gorsuch-chevron-deference.html)
------“Chevron deference” is likely to play a role in the Supreme Court confirmation hearings of Judge Neil M. Gorsuch next week. Named after the legal case from “which it arose, Chevron U.S.A. v. Natural Resources Defense Council,” it “addresses what courts should do when Congress passes a law with an ambiguous interpretation.” Surprisingly, the views of Gorsuch vary greatly from those of deceased Supreme Court justice Antonin Scalia. Scalia “loved Chevron deference, arguing that ‘in the long run Chevron will endure’ because it ‘accurately reflects the reality of government, and thus more adequately serves its needs.’ Judges, in his view, are just not as capable as administrators in 190
interpreting laws that the regulators themselves put into effect and know on a daily basis.” In the view of Gorsuch, thought, Chevron deference gives “too much power to federal agencies.”
********You can learn more about Chevron v. NRDC at: https://en.wikipedia.org/wiki/Chevron_U.S.A.,_Inc._v._Natural_Resources_Defense_Council,_Inc.. At that link it is noted that “Chevron is probably the most frequently cited case in American administrative law.” Presumably Chevron deference is an important element of the “administrative state” that White House chief strategist Stephen K. Bannon has said he wants to deconstruct (http://wapo.st/2mGmFls?tid=ss_mail).
(15 March 2017): “How to Restore Faith in Economics” (https://www.bloomberg.com/view/articles/2017-03-15/how-to-restore-faith-in-economics)
********I’m not sure why anyone would want to restore “faith” in economics or any other discipline that purports to be a science, but perhaps that is just a poorly chosen word. The article dredges up for me memories of courses in economic methodology that provided good arguments why economics cannot be a science in the same way that, say, chemistry is—the principle reason being that it deals with human beings who can exercise volition. Be that as it may, the article provides an interesting figure that shows “The Changing Nature of Economic Research” from 1963 through 2011 on a decadal basis, excepting 2011. The most dramatic change is the decrease in the percentage of papers devoted to theory and the increase in the percentage of papers devoted to empirical work employing its own data; there has also been a sizeable decrease in the percentage of papers devoted to empirical work employing borrowed data. This categorization, I suspect, is somewhat misleading because most empirical is highly theory laden.
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[The Invisible Forces Weekly: Economics with a Broader View] 309 (22 March 2017)
(17 March 2017): “Wages rise on California farms. Americans still don’t want the job” (http://www.latimes.com/projects/la-fi-farms-immigration/)
------Farmers in California “are being forced to make difficult choices about whether to abandon some of the state’s hallmark fruits and vegetables, move operations abroad, import workers under a special visa or replace them altogether with machines. Growers who can afford it have already begun raising worker pay well beyond minimum wage. Wages for crop production in California increased by 13% from 2010 to 2015, twice as fast as average pay in the state . . . Some farmers are even giving laborers benefits normally reserved for white-collar professionals, like 401(k) plans, health insurance, subsidized housing and profit-sharing bonuses. . . . But the raises and new perks have not tempted native-born Americans to leave their day jobs for the fields. Nin in 10 agriculture workers in California are still foreign born, and more than half are undocumented, according to a federal survey.” Growers with high-value crops, such as the Cabernet Sauvignon grapes of Napa Valley, “are luring employees from fields in places like Stockton that produce cheaper wine grapes or less profitable fruits and vegetables. Growers who can’t raise wages are losing their employees and dealing with it by mechanizing, downsizing or switching to less labor-intensive crops.”
********A clear example of the impact of more restrictions on the international movement of labor. Much of the article is built around the experience of growers of “low value” grapes near Stockton and that of growers of “high value” grapes in Napa. Low-value growers are losing their workers because they are being bid away by high-value growers. Although higher wages might be expected to entice American workers to compete for these jobs, even hourly wages of $19.50 have been unable to draw and retain them. Low-value grape growers who are unable to higher workers are looking to mechanize their processes or move into products like almonds and olives that require much less labor. Growers who mechanize will have some transition costs, too, as the planting of vines—spacing of plants and the like—will need to be adjusted so they can be mechanically harvested. For a look at another domestic industry being affected by a reduction in international workers, see the Wisconsin-focused article “Dairy farms fear Trump’s immigration policies” (http://www.jsonline.com/story/money/business/2017/03/06/dairy-farms-fear-trumps-immigration- policies/98700808/). “By some estimates, up to about 80% of the hired help on large Wisconsin dairy operations is immigrant labor — with a large percentage of those workers being undocumented. . . . Dairy farmers say they get almost “zero response” from native-born job applicants, even when the pay is comparable with nearby factories.
********The agricultural labor situation in California is being affected directly by a decrease in the supply of agricultural labor due to changes in federal government policy regarding the international movement of labor. Decisions made by the European Union regarding the production of beet sugar in the EU will affect the supply of sugar in the EU and bring about significant turmoil in countries that have traditionally large-scale exported of cane sugar. This topic is developed at reasonable length in 192
“Europe Is Waving Goodbye to Sugar Cane” (https://www.bloomberg.com/news/articles/2017-03- 16/sugar-trade-that-made-our-modern-world-longs-for-sweet-hereafter). As the article notes, “The European Union’s decision to remove limits on its own beet-sugar output from October means less demand for cane growers from Jamaica in the Caribbean, to the Pacific Island of Fiji, and Swaziland in southern Africa.” Especially hard hit will be high-cost producers like Belize and Guyana, which “produce less than 6 tons of sugar per hectare cultivated, compared with an average of about 10 for giants like Brazil.” On the international scene, Belize and Guyana are in much the same position as low-value grape growers in Stockton, California.
(17 March 2017): “The Upshot: What if Sociologists Had as Much Influence as Economists?” (https://www.nytimes.com/2017/03/17/upshot/what-if-sociologists-had-as-much-influence-as- economists.html)
------“Walk half a city block in downtown Washington, and there is a good change that you will pass an economist. People with advanced training in the field shape policy on subjects as varied as how health care is provided, broadcast licenses auctioned or air pollution regulated. . . . And there are economists sprinkled throughout the government—there is an entire council of them advising the president in most administrations [the Council of Economic Advisers], if not yet in this one. But . . . there just may be a downside to this one academic discipline having such primacy in shaping public policy. . . . Another academic discipline may not have the ear of presidents but may actually do a better job of explaining what has gone wrong in large swaths of the United States and other advanced nations in recent years.” The discipline? Sociology. This is not a new idea. “In 1967, [Minnesota] Senator Walter Mondale actually proposed a White House Council of Social Advisers; he envisioned it as a counterpart to the well-entrenched Council of Economic Advisers.” The CSA was never created, but if it had been it would have broadened the perspective beyond that of the CEA. “For starters, while economists tend to view a job as a straightforward exchange of labor for money, a wide body of sociological research shows how tied up work is with a sense of purpose and identity.”
********You can read a one-paragraph description of the CSA at: http://moses.law.umn.edu/mondale/publicwelfare.php. If you then google “The Full Opportunity and Social Accounting Act” you will find much information about the proposed act, which never passed despite repeated submissions in 1967, 1969, 1971, and 1973. It would be very interesting to study the history of the proposal, especially the questioning and testimony of the hearings. Can the arguments for a CSA be much different in 2017 than in 1967? I just noticed that it is the fiftieth anniversary of the proposed act.
(20 March 2017): “U.K. Trade Policy After Brexit Must Reckon With Gravity” (https://www.wsj.com/articles/u-k-trade-policy-after-brexit-must-reckon-with-gravity-1489928402)
------“Economists have for decades observed that the volume of trade between economies is tightly linked to their size and proximity. Countries export more to big economies than they do to small ones, 193
and they trade more with neighbors than with markets further away. For the economists who first discerned them, these patterns recalled the effect of gravity on celestial bodies in classical physics, where the force exerted by one object on another is determined by mass and distance. . . . The role of gravity in international trade highlights a potential problem for Prime Minister Theresa May as she begins complex negotiations to withdraw the U.K. from the European Union. The EU is big and nearby, making it a critically important trade partner for the U.K.” Dutch economist Jan Tinbergen, who shared the first (1969) Nobel Memorial Prize in economics, is typically credited with the idea of describing international trade as a gravity-like relationship between countries.
********The gravity model of international trade is discussed and formalized in Wikipedia (https://en.wikipedia.org/wiki/Gravity_model_of_trade). You can learn more about Tinbergen’s life and work at: http://www.nobelprize.org/nobel_prizes/economic-sciences/laureates/1969/tinbergen- facts.html.
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[The Invisible Forces Weekly: Economics with a Broader View] 310 (29 March 2017)
Upcoming Sabbatical. Please note that TIF Weekly will be on sabbatical for one year following the distribution of 312, which will complete its sixth year. More details will be provided when 312 is distributed. TIF Weekly 313 will be distributed on Wednesday, April 18th, 2018.
(23 March 2017): “How The ‘Scarcity Mindset’ Can Make Problems Worse” (http://www.npr.org/2017/03/23/521195903/how-the-scarcity-mindset-can-make-problems-worse)
********This seven-minute audio broadcast by NPR reporter Shankar Vedantam discusses some of the research on scarcity by economist Sendhil Mullainathan and psychologist Eldar Shafir on the cognitive consequences of scarcity. They are the authors of Scarcity: The New Science of Having Less and How It Defines Our Lives (https://www.amazon.com/Scarcity-Science-Having-Defines- Lives/dp/125005611X/). Their work, which falls squarely in the universe of behavioral economics, is discussed at some length in Harvard Magazine (http://harvardmagazine.com/2015/05/the-science-of- scarcity).
(23 March 2017): “America’s Farmers Say There’s a Conspiracy to Steal Their Milk Money” (https://www.bloomberg.com/news/articles/2017-03-23/dairy-farmers-say-someone-is-stealing-their- milk-money)
------“As far as staples go, dairy is pretty central to the American diet. After all, knowing cost of a gallon of milk remains a campaign-trail test for whether a politician is out of touch.” With milk sales in decline, dairy farmers have fallen on hard times. But some of those hard times appear to be the result of people who are supposed to looking after their interests. In a long-running class action, farmers claim that they “haven’t been getting their fair share in this multi-billion dollar industry. The litigation, filed by dairy farmers in 2009, names DairyAmerica and its affiliate California Dairies as defendants. The plaintiffs allege that DairyAmerica and its members, cooperatives like California Dairies which acquire dairy products from farmers and sell them in bulk, have been actively misleading U.S. regulators about the price they charge for nonfat dry milk, which goes into everything from infant formula to candy bars. In doing so, the farmers claim, the cooperatives sought to boost profits at their expense—by millions of dollars.”
********As the article points out, “the dairy market operates very differently from other segments of the U.S. economy.” As Andrew Novakovic of Cornell University notes, “I don’t think there’s another industry in the U.S. economy that is as heavily price regulated.” This price regulation has apparently left the industry open, if those bringing the class action are correct, to widespread pricing fraud made possible through the development of two sets of accounting figures at DairyAmerica: “The first set of figures would consist of accurate figures from the actual sales of nonfat dry milk in the export market to foreign customers. The second set of figures would consist of fabricated export sales figures that 195
were created internally at DairyAmerica.” The first, lower, set of figures were used as to (under) compensate dairy farmers. This makes for an astonishing read.
(23 March 2017): “’Deaths of Despair’ Are Surging Among the White Working Class” (https://www.bloomberg.com/news/articles/2017-03-23/white-working-class-death-rate-to-be- elevated-for-a-generation)
------New research by Anne Case and Angus Deaton, both of Princeton University, has drawn additional attention to the climb of mortality and morbidity, “which measure chances of death or illness within and age group,” since the late 1990s for less-educated whites between 45 and 54. That came as progress against “heart disease and cancer slowed and drug overdoses, suicide and alcoholism—so-called ‘deaths of despair’—became pervasive.” According to Case and Deaton, “Distress born of globalization and technological change probably drove the deadly outcome.”
********Sir Angus Deaton won the Nobel Prize in Economics in 2015 (http://www.nobelprize.org/nobel_prizes/economic-sciences/laureates/2015/deaton-facts.html). The new research mentioned in the article is “Mortality and morbidity in the 21st century,” a pdf of which can be downloaded at: https://www.brookings.edu/bpea-articles/mortality-and-morbidity-in-the-21st- century/; the paper is 60 pages long but contains a lot of discussion as well as a substantial number of figures toward its end, i.e., starting on page 45 of the pdf. At the same link, you can view a four- minute video with Case and Deaton discussing their work. Also useful is the five-minute NPR interview at: http://www.npr.org/sections/health-shots/2017/03/23/521083335/the-forces-driving- middle-aged-white-peoples-deaths-of-despair.
********The new research has been widely covered in the media, so this is just one of many articles that could have been mentioned. The articles I’ve seen have tended to focus on Figure 1.1 (p. 45) of the pdf. This is a dramatic figure in that it shows a “crossing” of mortality rates for White non- Hispanics high school or less and Black non-Hispanics, an image that is easy to misconstrue since the Black non-Hispanics group doesn’t appear to be constrained to be high school or less. That is, the two groups seem not to be directly comparable in relation to education. To get greater comparability, you need to look at Figure 1.2 (p. 45). There you will see that Blacks continue to have higher mortality rates than Whites throughout the study period for non-Hispanics with a high school degree or less. What clearly is true, however, is that the mortality gap between Blacks and Whites have fallen dramatically, with Black rates generally falling and White rates generally increasing. In recent years, though, rates for Blacks and Whites have been increasing. The many Figures of the paper that start on page 45 are, to say the least, shocking.
(24 March 2017): “UPS Loses N.Y. Trial Over Reservations’ Untaxed Cigarettes” (https://www.bloomberg.com/news/articles/2017-03-24/ups-found-liable-in-new-york-lawsuit-over- untaxed-cigarettes) 196
------“United Parcel Service Inc. was found by a judge to have turned a blind eye to shipments of untaxed cigarettes to New Yorkers from American Indian reservations that undermined anti-smoking efforts. . . . U.S. District Judge Katherine B. Forrest in Manhattan on Friday ruled that UPS failed to comply with a 2005 deal it struck with the state to fix the problem without going to court.” New York “has the highest state cigarette tax at $4.35 a pack on top of a $1.50 local New York City tax.” Over 50 percent of the “total cigarette market in New York consists of smuggled cigarettes.”
********The article appears to be based upon a study of the Tax Foundation, “Cigarette Taxes and Cigarette Smuggling by State, 2014,” (https://taxfoundation.org/cigarette-taxes-and-cigarette- smuggling-state-2014/), date 17 January 2017. The list of Key Findings contains such notable points as “New York has the highest inbound smuggling activity” at 55.4 percent of cigarettes consumed and “New Hampshire has the highest level of outbound smuggling at 81.1 percent of consumption, likely due to its relatively low tax rates and close proximity to high tax states in the northeastern United States.” Figure 1 shows a positive correlation between excise tax rates and cigarette smuggling as a percentage of consumption. I’m sure the correlation would have been even tighter had proximity been considered. In any event, the relationship between excise tax rates and smuggling is not the least bit surprising. Tax differentials provide opportunities for gain and some will be enticed by them regardless of legality.
(27 March 2017): “Mexican Farmers Fight to Oust Border Brewery” [SR](https://www.wsj.com/articles/mexican-farmers-fight-to-oust-border-brewery-1490616001)
------Thousands of farmers in Mexicali, Mexico [about 100 miles ESE of San Diego] “are rallying to an unusual cause: driving a big U.S. manufacturer out of town, ideally with help from U.S. President Donald Trump.” At issue is the construction of a $1.4-billion-dollar brewery being built by Constellation Brans, “the third-largest U.S. beer producer and the brewer of Corona, the best-selling beer in Mexico. . . . None of the beer to be brewed in Mexicali is destined for the Mexican market.” Farmers are concerned that “the plant will use too much water, taxing the aquifer in an area where aging irrigation infrastructure and a naturally low water table have already forced farmers to pull tens of thousands of acres out of production.” In recent decades, “Mexico has re-engineered its economy to focus on exports. While hundreds of thousands of workers have benefited from higher wages, mainly in large cities and in border assembly plants known as maquiladoras, the agricultural sector has suffered from a lack of investment and increased competition from larger, more technologically advanced farms in the U.S.”
********Carlos de la Parra, a professor of environmental- and urban-studies at the College of the Northern Frontier in Tijuana, provides a prototypically economic comment when he notes that “Historically, the Mexicali Valley was all about farming, but more and more, if you want to increase the aggregate value of the use of water, you want to attract more industry.” I.e., water can be used in agriculture and it can be used in industry. From the perspective expressed, the water goes to the use that generates the greatest monetary value. As the article points out, the “local water table is getting 197
lower and lower.” In the 1990s “wells used to be 100 feet deep,” but now they must go down to 250 feet.” So, the addition of more industry has increased the unit-cost of production for agricultural products, a classic example of a negative production externality (http://www.economicsonline.co.uk/Market_failures/Externalities.html).
********A related article that also deals with Mexican agriculture, this time corn production, appeared in The Los Angeles Times as “Mexico’s bargaining chips with Trump? How about a corn boycott” (http://www.latimes.com/world/mexico-americas/la-fg-mexico-corn-boycott-20170329- story.html). In 2016 the U.S. exported 13.9 million tons of corn to Mexico, as compared to 3.1 million tons in 1994, the year NAFTA went into effect. So, yes, U.S. corn farmers would stand to lose a lot from a boycott of corn by Mexico. It is interesting to me that NAFTA enabled a decrease in industrial jobs in the U.S. and an increase of industrial jobs in Mexico, and simultaneously enabled a decrease in agricultural jobs in Mexico and an increase of agricultural jobs in the U.S. This is the way it is supposed to work, but in both the U.S. and Mexico, the people who lost their jobs are not happy about it. No doubt there has been a diminution of knowledge and skill in relation to both types of activity over the last 23 years.