Welcome to week 356! The articles below caught my attention this week. What are intended to be relatively objective “briefs” are preceded by dashes (——–), whereas additional material or relatively subjective comments are preceded by asterisks (********). Article titles preceded by [SR] require a subscription.
(5 February 2019): “Ikea will soon offer furniture rentals because the end of ownership is near” Vox.com
——–“Ikea, the world’s largest furniture seller, is trying out a new business model: renting. In an interview with the Financial Times, Ikea’s Torbjorn Loof, who is
charge of the company’s brand and concept arm, Inter Ikea, said the company would soon be starting to experiment with furniture rentals.” Loof noted: “We will work together with partners so you can actually lease your furniture . . . When that leasing period is over, you hand it back and you might lease something else. And instead of throwing those away, we refurbish them a little and we could sell them, prolonging the life cycle of the products.” A move toward furniture rentals is connected to Ikea’s desire to have smaller, more centralized stores in keeping with a move to greater sustainability. But it also in keeping with developments related in The End of Ownership: Personal Property in the Digital Economy, by Aaron Perzanowski and Jason Schultz.
********The buy-lease decision is frequently encountered in courses on corporate finance and management accounting. Now, it seems, this decision will be increasingly faced by households. All this is sure to be wrapped up in The Experience Economy, where some, who can afford it, will opt for the more varied decors that furniture rentals can provide. In moving from purchasing to rentals, transaction costs of many kind will likely loom large.
(7 February 2019): “Seven Fixes for American Capitalism” Bloomberg Businessweek
——–“For the past few decades there’s been a rough consensus about how to run a modern capitalist economy.” But this “centrist consensus is losing its power. Republicans are being drawn toward the protectionism of President Trump, Democrats toward the socialism of Representative Alexandria Ocasio-Cortez, the freshman congresswoman from New York City.” So, this seems like “a good time to look at some of the ideas for fixing American capitalism that will be debated in the 2020 presidential campaign.”
********Here are the seven fixes: (1) Antitrust Pivot; (2) Supply-Side Economics; (3) German Model; (4) Modern Monetary Theory; (5) Tech to the Rescue; (6) Tariff Truthers; and (7) Libertarianism. A brief, but not too brief, discussions of each fix is provided. Most of these will be somewhat familiar, except perhaps for the German Model, in which there is substantial labor representation on the boards of large public corporations, and Modern Monetary Theory (MMT). If you want to learn a bit more about MMT, Marketplace has a nice piece: “Every heard of modern monetary theory?” The broadcast is seven minutes long and the article includes has some schematics illustrating how MMT works. The broadcast includes an interview with Stephanie Kelton, who “is almost universally acknowledge as the person to talk to about MMT.” You can learn more about Kelton here.
(7 February 2019): “The Bad News About Helicopter Parenting: It Works” The New York Times
——–“It’s a familiar story. Psychologists, sociologists and journalists have spent more than a decade diagnosing and critiquing the habits of ‘helicopter parents’ and their school obsessions. They insist that hyper-parenting backfires—creating a generation of stressed-out kids who can’t function along. Parents themselves alternate between feeling guilty, panicked and ridiculous. But new research shows that in our unequal era, this kind of parenting brings lifechanging benefits.” That research is discussed in Love, Money and Parenting: How Economics Explains the Way We Raise Our Kids, by economists Matthias Doepke (Northwestern University) and Fabrizio Zilibotti (Yale University). “It’s true that high-octane, hardworking child-rearing has some pointless excesses, and it doesn’t spark joy for parents. But done right, it works for kids, not just in the United States but in rich countries around the world.”
********This book seems to be an empirical and historical study, rather than simply an exercise in economic thinking, for which I am grateful. I’ve ordered a copy and look forward to reading it sooner rather than later. It seems like helicopter parenting does make a difference in life outcomes, but not everyone can afford the time and money to be a helicopter parent and some who can choose not to because of their beliefs.
(7 February 2019): “The Resurrection of American Labor” Bloomberg Businessweek
——–“According to the official records, U.S. workers went on strike seven times during 2017. That’s a particular nadir in the long decline of organized labor: the second-fewest work stoppages recorded by the U.S. Bureau of Labor Statistics since the agency started keeping track in the 1940s. There was little reason to believe 2018 would be different, especially with the U.S. Supreme Court, in two decisions, making it harder for public employees unions to fund themselves and restricting workers’ rights to bring class actions. The power of employers appeared to be almost limitless. The unions were, if not busted, then certainly on the verge. Aggrieved workers, however, took matters into their own hands, using social media and other tech tools to enhance their campaigns.” As a result, the “official number of major work stoppages recorded by the BLS in 2018 nearly tripled, to 20. Off the picket line, workers also won a wide range of concessions.”
********As the article goes on to show, the decline of union power has not necessarily meant the decline of employee power, but the means of giving “voice” to employment concerns has changed, making substantial use of social media. As Tom Kochan of MIT’s Sloan Institute for Work and Employment Research has noted: “Workers aren’t waiting for the traditional forms of organizing, as provided under labor law . . . They’re looking for new options, whether that’s Google employees on a one-day walkout or workers filing online petitions with their management about everything from scheduling to fringe benefits.” This is an interesting development, especially when considered in relation to greater advocacy for “the German Model” noted in the article above on “Seven Fixes for American Capitalism.”
(11 February 2019): “A hedge fund’s ‘mercenary’ strategy: Buy newspapers, slash jobs, sell the buildings” The Washington Post
——–Alden Global Capital is a hedge fund that has a newspaper business Digital First Media that “is bidding to buy Gannett, operator of the nation’s largest chain of daily newspapers by circulation, including USA Today—as well as its $900 million in remaining property and equipment—for more than $1.3 billion. The tactics employed by Alden and Digital First Media are well-chronicled: They buy newspapers already in financial distress, . . . reap the cash flow and lay off editors, reporters and photographers to boost profits. In a 2018 court case, Alden disclosed it has a series of affiliated real estate companies whose business is focused primarily on efficiently buying, selling, leasing and redeveloping newspapers’ offices and printing plants.”
********This article, on the lengthy side, provides a clear look at how Alden and its affiliated real estate company Twenty Lake Holdings operate. One real estate transaction is close to home:
In April of last year, Gannett sold Twenty Lake the headquarters of the Asheville Citizen-Times in North Carolina for $3.2 million. In a transaction the county recorded on the same day, Twenty Lake flipped the property to a local developer for $5.3 million.
The practices of Alden are very general. Look for “undervalued” assets, buy them, resell them, and reap the profit. All this, of course, is the invisible hand doing its work. But often these workings are not pretty. The activities of this hedge fund (and its like) are similar to those of a butcher—a business may be more valuable in pieces than as a whole going concern.
May you have a good week!
Welcome to week 355! The articles below caught my attention this week. What are intended to be relatively objective “briefs” are preceded by dashes (——–), whereas additional material or relatively subjective comments are preceded by asterisks (********). Article titles preceded by [SR] require a subscription.
(28 January 2019): “The Cost of Dirty Money” Bloomberg.com
********This is a global map with text of some of the larger instances of money laundering. The former Wachovia Bank of Charlotte, since acquired by Wells Fargo, makes an appearance. “Mexican drug cartels used accounts at Wachovia to finance their operations and launder money. From 2004 through 2007, the bank . . . processed at least $373 billion in wire transfers from Mexican currency houses.” In consequence of its actions, Wachovia was fined $160 million.
(29 January 2019): “Lawmakers want to cut California’s pot taxes to help lagging legal market” The Los Angeles Times
——–“Frustrated that California’s licensed marijuana industry is struggling to compete against the black market, a group of state officials is pressing to slash taxes on legal pot shops and growers. Lawmakers acknowledged that a year after the state began issuing licenses for growing and selling marijuana for recreational purposes, the legal market has been stunted by red tape, the refusal of cities to allow pot businesses and the burden of paying state and local taxes.” According to Assemblyman Rob Bonta, the primary author of the measure, “The tax cut . . . will help ‘keep customers at licensed businesses and help ensure the regulated market survives and thrives.’” It was anticipated that pot tax revenues would be $630 million “this fiscal year, which ends June 30, but the number was revised down this month to $355 million.”
********As the article makes clear, the higher the legal price of marijuana, the larger the black market for it. No surprise here. But as consumers direct more of their purchases to the black market, state tax revenues fall. So, lower tax rates on marijuana will move some consumers from the black market to the legal market. Will that be enough to increase state tax revenues, too? That is an empirical question.
********California State Treasurer Fiona Ma is an advocate of reduced marijuana taxation, saying that “We are helping legal cannabis business with their transition into the marketplace, just like we would for any start-up industry.” All this reminds me of the infant-industry argument for trade protection. In that case, the nascent industry in one country is protected from the established industry in another country by trade barriers of one sort or another, on a “temporary” basis. In this case, it seems, legal marijuana must be exposed to low taxes until it can get established in relation to the black market, no doubt also on a “temporary” basis.
(31 January 2019): “Culture of ‘Bending Rules’ in India Challenges U.S. Drug Agency” Bloomberg.com
——–“Mylan is the world’s second-largest manufacturer of generic drugs, and though it’s run from Canonsburg, Pennsylvania, its operations three hours inland from Mumbai exemplify the central role India has come to play in the global generic-drug industry. . . . One of the drugs made in that plant is destined for the U.S., where it’s the second-best-selling generic version of Lipitor, taken by millions of Americans to control cholesterol and lower their risk of heart attack. But a review of thousands of reports submitted to the U.S. Food and Drug Administration shows Mylan’s version of Lipitor is more likely to be associated with negative side effects than its rivals: 60 percent more than the top-selling generic version made by a Canadian company and quadruple that of the third-best-selling generic made by an India-based company.”
——–Although doubts about generic drugs aren’t limited to India, “veterans of India’s pharmaceutical industry” point to the word jugaad. “The Hindi word, translated as ‘creative improvisation’ . . . has been elevated to something of a national ideal in India. It’s credited with the rise of the country’s two global industries, technology and drugmaking. In both, Indian companies with far fewer resources than foreign rivals came up with cheaper, more effective ways of doing things that ended up being a competitive advantage. But the word can have a darker connotation. According to Jagdish Dore of Mumbai’s pharmaceutical-industry consultancy Sidvim LifeSciences, “It’s kind of bending the rules, breaking the rules, and finding shortcuts—and in some cases, outright misdemeanors.”
——–The emergence of jugaad is traced to India’s colonial era, “When laws and regulation were often in service of British interests, rather than Indian ones, and so fair game to be skirted, bent or broken. After independence in 1947, the period of heavy handed government control and regulation of the economy knowns as the ‘License Raj’ further cemented a flexible approach to the rules as a precondition for success in India.”
********This is a nice instance of social and historical forces at work, i.e., the invisible handshake, although legal and political forces, the invisible foot, and economic forces, the invisible hand, are clearly intertwined. Laws and regulations, if sufficiently onerous, will be circumvented as the occasion presents. Perhaps it isn’t culture so much as ill-formed institutions.
********This is one of four articles that are the result of “A yearlong investigation by Bloomberg News into the generic-drug industry.” Here are the articles:
(29 January 2019): “America’s Love Affair With Cheap Drugs Has a Hidden Cost”
(30 January 2019): “How a Tainted Heart Drug Made in China Slipped Past the FDA”
(31 January 2019): “Culture of ‘Bending Rules’ in India Challenges U.S. Drug Agency”
(1 February 2019): “The $4.3 Billion Deal That Blew Up Over Shoddy Drug Production”
(4 February 2019): “Bud Light Picks Fight With Corn Syrup in Super Bowl Ad” The New York Times
********Well, I didn’t watch Super Bowl LIII and I didn’t see the ad until now, but this article does raise thoughts about intention and consequence in ads, which are raised in the article. Surely the ad annoyed many corn growers in the U.S., and it brought about some appropriate responses from the producers of Miller Lite and Coors Light to the effect that although Bud Light does not use corn syrup, some of Anheuser-Busch InBev’s prominent products do. And then there is issue of corn syrup versus high fructose corn syrup. The result of all this has been to divert attention away from Bud Light and to corn syrup, about which few drinkers care. As Wendy Clark, the chief executive of advertising agency DDB Worldwide, notes: “I don’t know if anyone watching the Super Bowl necessarily cares about corn syrup, and it kicked up much ado about nothing . . . It’s taken off into this corn syrup thing and not a Bud Light thing . . . and I don’t know if that was the goal.”
********Done well, an ad campaign can be transformative, both for its company and for society. The article “Cutex Hooked Americans on Manicures” JSTOR Daily provides an example. As the article begins, “Nail art is a huge trend now, but in 1916 it didn’t really exist. Enter Cutex, a company that helped hook Americans on the little pleasures of polished nails.” See the bottom of the post to download the primary article from Journal of Design History.
(5 February 2019): “The Rise of the Robot Reporter” The New York Times
——–“As reporters and editors find themselves the victims of layoffs at digital publishers and traditional newspaper chains alike, journalism generated by machine is on the rise. Roughly a third of the content published by Bloomberg News uses some form of automated technology. The system used by the company, Cyborg, is able to assist reporters in churning out thousands of articles on company earnings reports each quarter. . . . Untiring and accurate, Cyborg helps Bloomberg in its race against Reuters, its main rival in the field of quick-twitch business financial journalism, as well as giving it a fighting chance against a more recent player in the information race, hedge funds, which use artificial intelligence to serve their clients fresh facts.” But financial information companies are not the only ones going robot: “robot reporters have been prolific producers of articles on minor league baseball for The Associated Press, high school football for The Washington Post and earthquakes for The Los Angeles Times.” Journalism executives say that the growing use of artificial intelligence “is not a threat to human employees. Rather, the idea is to allow journalists to spend more time on substantive work.”
********Many other large, main-stream newspapers are reported as using or experimenting with robot reporting, so we can expect more of it in the future. (How will one know if a story is robot reported? Does it matter?) Although The New York Times is said to have no plans for machine-generated news articles, “the company has experimented with using A.I. to personalize newsletters, help with comment moderation and identify images as it digitizes its archive.”
********Evidently The Washington Post has “an in-house robot reporter called Heliograf, which demonstrated its usefulness with its coverage of the 2016 Summer Olympic Games and the 2016 elections.” As a result of Heliograf, it won an award for “Excellence in Use of Bots at the annual Global Biggies Awards, which recognize accomplishments in the use of big data and artificial intelligence.” Here is the list, with description, of all 39 winners of 2018 Global Biggies Awards.
********This article raises the question of the impact of robots on the work force, generally. This is taken up in “Tech Is Splitting the U.S. Work Force in Two” The New York Times. The context examined is Phoenix, Arizona, where it is hard to miss its “dogged technological ambition.” But Phoenix “cannot escape t he uncomfortable pattern taking shape across the American economy: Despite all its shiny new high-tech businesses, the vast majority of n jobs are in workaday service industries, like health care, hospitality, retail and building services, where pay is mediocre.” These are just the jobs where technology seems little able to increase productivity. Tech, of course, cannot do everything, as reporter Emily Badger notes in “Why Technology Hasn’t Fixed the Housing Crisis” The New York Times. There are larger forces at work: “Pull a thread in the housing market, and it leads to the decline of good working-class jobs, or the federal government’s long-term retreat from housing, or the fundamental tension that Americans want housing to be both affordable and a good investment.”
(6 February 2019): “Yacht Influencers and Food Sommeliers” Bloomberg.com
********These are today’s morning reads of Barry Ritholtz , which I continue to find useful to scan. What caught my attention and followed up were the links on Impact Investing, which you might recognize as Socially Responsible Investing or ESG (Environmental, Social, and corporate Governance) Investing. Evidently Boise, Idaho-based Matthew Weatherley-White—no pun intended—is a big name in the field. Here are the links:
“The Debate About Impact Investing We Should Be Having” Barron’s. This is an article by Matthew Weatherly-White.
“MiB: Matthew Weatherly-White” The Big Picture. MiB stands for Masters in Business. This is an interview with Matthew Weatherly-White conducted by Barry Ritholtz. The podcast is one hours and 25-minutes long. I listened to about the first four minutes and many come back to it. It sounds like a good way to get a broad overview of impact investing and its history, as well as its possibilities.
You might also be interested in learning a bit more about Barry Ritholtz. From what I read, impact investing is likely to continue to expand as the approach is particularly attractive to women and millennials, the latter of which are likely to be inheriting impressive sums of money over the years to come.
May you have a good week!
Welcome to week 354! The articles below caught my attention this week. What are intended to be relatively objective “briefs” are preceded by dashes (——–), whereas additional material or relatively subjective comments are preceded by asterisks (********). Article titles preceded by [SR] require a subscription.
(21 December 2018): “How to Buy a Cure” Bloomberg.com
********This is the eighth and final episode of the Prognosis series: “A podcast about people living on the edge of medical innovation.” This episode looks, quite literally, at “How to Buy a Cure” for a disease, in this case cystic fibrosis. In the world of Big Pharma and Big Health Insurance, especially the former, it is not enough to have a disease that causes suffering, there has to be a way to make money from it. The featured interviewee of the podcast is Bob Coughlin, a “recovering politician” whose son has CF. Coughlin is the President of the Massachusetts Biotechnology Council and has a clear and unapologetic perspective on how diseases are cured. An eye-opening podcast, I listened to it about a month ago and it is impressing me, again, as I write these words.
(January/February 2019): “Snake-Oil Economics: The Bad Math Behind Trump’s Policies” Foreign Affairs
********This is a review, by N. Gregory Mankiw, of Trumponomics: Inside the American First Plan to Revive Our Economy, by Stephen Moore and Arthur B. Laffer. In short, Mankiw has little use for Trumponomics, I call attention to the review primarily because of its first page, which summarizes “three possible voices” that economists can choose among “to convey their message.” First, that of the textbook authority. Second, that of the nuanced advocate. Third, that of the rah-rah partisan. Mankiw holds that Moore and Laffer’s book is written in the third voice, embracing “economic tribalism.” In developing his review, Mankiw draws attention to Arthur Okun’s valuable little book, Equality and Efficiency: The Big Tradeoff. The policies of “pie growing” and “pie division,” to which Okun referred, are sure to be continual themes as we move toward the next presidential election in 2020. See page 178 of the review to see the reference to Okun.
(23 January 2019): “Robert Nelson, U-Md. professor and expert on belief systems, dies at 74” The Washington Post
——–Robert H. Nelson died on December 15th at the age of 74 from acute appendicitis while attending a conference in Helsinki, Finland. After 18 years of service as a policy analyst for the Interior Department, he joined the staff of the University of Maryland’s School of Public Policy in 1993. Although trained as an economist, he “branched into other fields, including climate change and theology.”
********Nelson’s website includes much information about the man and his writings. To the extent that I know him, it is through the titles of three books that grapple with economics, religion, and the environment. They are: Reaching for Heaven on Earth: The Theological Meaning of Economics (1991); Economics as Religion: From Samuelson to Chicago and Beyond (2001); and The New Holy Wars: Economic Religion vs. Environmental Religion (2010). For description of these and four of his other books, check out the books section of his website.
(25 January 2019): “Big Pharma’s Drug Studies Are Getting a NASA-Style Makeover” Bloomberg Businessweek
——–“Discoveries of new cancer-fighting and antiviral medicines grab headlines and sometimes win Nobel Prizes. But after the breakthroughs and backslapping are over, Big Pharma’s grunt work is just beginning. . . . it can take more than $2 billion and 12 years to launch a new treatment.” According to Justin Hoss, a consultant on technology and the life sciences for KPMG, drugmakers “do an excellent job of drug discovery” but they encounter a big bottleneck when “they get to a point of doing clinical trials.” So, “The faster they get people through clinical trials, they’re going to know whether their investment was worth it or not.” Delays during human testing are common. “French drugmaker Sanofi estimates that as many as 7 out of 10 trials are hit by enrollment snags. Every extra week getting to market subtracts about $300,000 from sales before cheaper copies emerge.” That’s why “companies from Novartis AG to Sanofi to AstraZeneca Plc are turning a microscope on the efficiency of their drug trials.” To do so, “Novartis dispatched teams to jetmaker Boeing Co. and Swissgrid AG, a power company, to observe how they use technology-laden crisis center to prevent failures and blackouts. That led to the design of something that looks like the pharma version of NASA’s Mission Control: a global surveillance hub where supercomputers map and chart Novartis’s network of 500 drug studies in 70 countries, trying to predict potential problems on a minute-by-minute basis.”
********I would presume that project management is an active field of research for drugmakers, as anything that can be done to get drugs to market more quickly, ceteris paribus, will surely provide a competitive advantage. For one view of the drug development process, take a look at the five steps outlined by the U.S. Food and Drug Administration. There is a similar process for medical devices.
(27 January 2019): [SR] “New Job for Robots: Taking Stock for Retailers” The Wall Street Journal
——–“Retailers that have been turning to robots to handle inventory in warehouses are testing whether machines can handle a new task: detecting when store shelves need restocking. Keeping track of inventory and doing it quickly has become one of the most pressing supply-chain concerns for merchants as they try to put into place new strategies for selling and delivering goods under the fast-changing demands of e-commerce. Services including rapid home delivery and buy online-pickup in store ae pushing retailers to blur the lines between distribution centers and stores—and obscure their view of how many items may be in stock and where the goods are held. The complicated blending of inventories in stores and warehouses has some retailers testing the use of shelf-scanning robots that roam store aisles and send restocking data back through their networks.”
********A provocative article that has made me think a bit more about the relationships between the online portal, retail stores, and distribution centers. It certainly makes clear to me how relatively simple the operation of Amazon—distribution centers and online—as opposed to Wal-Mart that does all three. I thought the comments on the article—8 at my reading—were more interesting than usual. For example, will better knowledge of store inventory, say in grocery stores, lead to shallower displays since less stock will need to be displayed at a given time?
(28 January 2019): “On patrol with the enforcer of D.C.’s plastic-straw ban” The Washington Post
——–“Nine years after the District [of Columbia] instituted a nickel tax on plastic bags and three years after it banned plastic foam food containers, it has turned on plastic straws—the newest target of environmentalists trying to reduce millions of tons of plastic that ends up in trees, waterways and in the bellies of wildlife.” Zach Rybarczyk is one of three inspectors dispatched by the city of Washington, D.C. to “check cafeterias, bars and restaurants” to see if recent plastic straw legislation is being adhered to (and give businesses warnings if they are not). He will check in July to see if the law is being followed, with a possible fine of $800 if it is not.
********I was interested to learn that there are people whose job descriptions include the enforcement of plastic straw laws.
(28 January 2019): [SR] “Soy Prices Are in a Trough After China’s Sick-Pig Slaughter” The Wall Street Journal
——–China’s pig population is shrinking, and that’s bad news for American soybean farmers. The country is the world’s largest importer of soybeans, which are mostly crushed to produce oil and soybean meal—a high-protein feed for livestock, including pigs, cattle and even fish. China’s 400 million-plus hogs are the biggest consumer of the lot. But last summer a disease called African swine fever was detected in some pigs in the north, and as the virus spread to many parts of the country farmers and authorities have culled hundreds of thousands of pigs in hopes of containing the problem. A shrinking pig population means less need for soybeans. And while the virus, deadly togs, isn’t harmful to humans, it has turned some people off the meat, denting pork sales.”
********This is a simple story of economic interdependence—African swine fever in China decreases the size of the pig population in China, thereby reducing the demand for soybeans and driving soybean prices down (also reported in the story). As a result, farmer income declines, in the U.S. and elsewhere, especially Brazil.
********It turns out that African swine fever is on the minds of the residents of Denmark, as indicated by “Boar-der security: Fearing disease, Denmark builds a wall to keep out swine” The Washington Post. “Fearing the spread of African swine fever, the country began erecting its own southern border wall Monday. . . . The 43-mile-long steel-mat fence ill stand five feet tall and extend across the Danish-German border. The project, aimed at barring wild boars from the Danish countryside, is scheduled to be completed within the year. Though there have not been any reported cases of African swine fever in Germany, Belgium’s Federal Agency for the Safety of the Food Chain observed an increase in reports from Western Europe last fall, including to confirmed cases in the Belgian province of Luxembourg.” There is concern that an outbreak of African swine fever . . . could devastate Denmark’s $4.5 billion pork industry. No treatment or vaccination for the disease exists.”
********Interesting that two stories on African swine fever appeared on the same day—one from China and one from Denmark. So how prevalent is ASF? The World Organisation for Animal Health provides much information on many aquatic and terrestrial animal diseases, African swine fever. On that page, you can find links to a variety of reports, include the situation report for December 15, 2018—January 17, 2019 which shows ASF outbreaks during that period. A look at the spatial distribution map for Europe is somewhat ominous.
(29 January 2019): “Warning! Everything Is Going Deep: ‘The Age of Surveillance Capitalism’” The New York Times
********Shoshana Zuboff’s book The Age of Surveillance Capitalism has raised quite a stir. Today NYT columnist Thomas Friedman weights in on some of the issues Zuboff raises in her book. In doing so he takes us on a quick tour of recent technological developments that provide access to “deep” levels of human experience to sell ads and make a profit. Friedman says some important things we he notes:
Regulations often lag behind new technologies, but when they move this fast and cut this deep, that lag can be really dangerous. . . . This has created an opening and burgeoning demand for political, social and religious leaders, government institutions and businesses that can go deep — that can validate what is real and offer the public deep truths, deep privacy protections and deep trust. But deep trust and deep loyalty cannot be forged overnight.
Trust, it seems, is a long-run phenomenon. But what do we do in the meantime?
May you have a good week!
Welcome to week 353! The articles below caught my attention this week. What are intended to be relatively objective “briefs” are preceded by dashes (——–), whereas additional material or relatively subjective comments are preceded by asterisks (********). Article titles preceded by [SR] require a subscription.
(16 January 2019): [SR] “Business Worries About Climate Intensify. Business Actions to Fix it, Not So Much.” The Wall Street Journal
——–“Every year the World Economic Forum asks 1,000 business, policy and thought leaders to rank about 30 risks facing the world by both impact and likelihood. In this year’s report, released Wednesday, climate-related risks top the list. The WEF . . . has been running this exercise for 14 years. While some risks come and go with the headlines, climate has been rising steadily through the ranks and has led the list for the last three years. If the firs step to solving a problem is admitting you have a problem, this should mean climate change is well on its way to being solved. The reason it isn’t is that the world is much readier to admit climate change is a problem than to do anything about it. This is especially true of businesses in the U.S., many of whom claim concern about climate change then fight solutions that hit their bottom line.”
——–A deeper dig into the WEF’s report sheds light on the dichotomy between concern and action. “Asked additionally to rank only short-term risks, respondents ranked climate only 11th . . . In other words, the closer businesses and others focus of the here and now, the less pressing climate change becomes. Perhaps this dichotomy shouldn’t surprise. Any individual business can adapt to the consequences of a warming climate . . . But none can solve it. . . . That almost always requires a policy intervention . . . Small wonder, then, that among WEF respondents’ top climate-related concern is ‘failure of climate change adaptation and mitigation,’ in other words, an absence of policies.”
********The primary document is The Global Risks Report 2019, which can be downloaded here. The download is 114 pages and contains some stunning figures that are well worth a look: Figure I: The Global Risks Landscape 2019, see p. 5 of the Report; Figure II: The Risks-Trends Interconnections Map 2019, see p. 6; and Figure III: The Global Risks Interconnections Map 2019, see p. 7. Figures II and III make it unmistakable that our current risks are interrelated and that thinking systemically is essential for addressing them. On the same page as the Report, you can view a 55-minute video providing an overview of the Report.
********Although the headline of the WSJ article indicates that businesses are not taking too much action on climate change, they are clearly thinking about, as is made evident in “Corporate America Tallies the Mounting Costs of Climate Change” Bloomberg.com. More than 7,000 companies worldwide filed a report on “their environmental impact, including the risks and opportunities they believe climate change presents for their businesses” to U.K.-based nonprofit CDP (formerly Carbon Disclosure Project). You can view company scores for 2018 at their website. This article takes us through a series of concerns raised by businesses in their reports, while also noting that “Climate change isn’t all downside for the largest U.S. companies. Many of those that filed reports with CDP said they believe climate change can bolster demand for their products. For one thing, more people will get sick.” Merck & Co. wrote: “As the climate changes, there will be expanded markets for products for tropical and weather related diseases including waterborne illness.”
(17 January 2019): “5 Pieces of Advice From John Bogle” The New York Times
********John Bogle, the founder of The Vanguard Group of Investment Companies that manage almost $5 trillion in funds, passed away on January 16th. At a time when financial markets are in turmoil and the political environment is tense, his five pieces of advice are worth considering so that cooler heads might prevail. Bogle was a financial legend, proud that he wasn’t a billionaire. Reasons for that price, and an argument that he “created more social good than any contemporary in finance” can be found here.
(17 January 2019): “Playing The Gender Card: Overlooking And Overthrowing Sexist Stereotypes” NPR
********This is an episode of the “Hidden Brain” podcast by Shankar Vedantam. At 50 minutes it is not brief, but it is engaging and enlightening. It considers a female professional poker player and a male nurse, with researcher comments, thereby exploring how women and men think about and experience their work in professions that are counter to gender stereotypes. In doing so, it points to the personal and societal loss from gender (and other) stereotypes. I was struck by its concluding lines:
Stereotypes are powerful, because the stories we tell about ourselves are powerful. They shape how we see the world and how the world sees us. But in the end, they are only stories, and stories . . . we can rewrite them.
********Although the connection may not be obvious, this seems like a good place to make note of “The Art of Decision-Making” The New Yorker. Starting out as a seeming review of Farsighted: How We Make the Decisions That Matter the Most, it moves onto the terrain of philosophy, where Israeli philosopher Edna Ullmann-Margalit’s article “Big Decisions: Opting, Converting, Drifting” is discussed. Such decisions are referred to as “transformative choices,” in effect, ones where a course of action will profoundly affect one’s sense of self, the action transforming an “Old Person” who exists before the action into a “New Person” who exists afterwards. How does one think consistently about such a decision? In any event, new and old people, as well as the person we are and the person we think we are in relation to a stereotype, seem to related to the literature on multiple selves, one example of which can be gleaned from the Abstract for “From dual processes to multiple selves: Implications for economic behavior.”
(18 January 2019): “Europe’s Most Important River Is Running Dry” Bloomberg.com
——–The Rhine River “snakes 800 miles through the industrial zones of Switzerland, Germany and the Netherlands before emptying into the sea at Rotterdam, Europe’s busiest port. It serves as a key conduit for manufacturers such as Daimler AG, Robert Bosch GmbH and Bayer AG.” But after “a prolonged summer drought, the bustling traffic at one of the shallowest points on the Rhine ground to a halt for nearly a month late last year . . . It was the latest sign of how even advanced industrial economies are increasingly fighting the effects of global warming.” As a result, some companies, such as steelmaker Thyssenkrupp AG has been moving materials by rail rather that barge, at substantially greater cost. “To thwart future transport-related disruptions to the economy, Chancellor Angel Merkel’s government is mulling measures such as permanently easing Sunday restrictions on truck traffic in Rhine states, lightening loads on barges and improving freight train connections”
********I think the summary above tells the story, providing another example of the consequences of climate change. The choice of transportation medium depends upon the prices of the transportation alternatives, and when one medium becomes more expensive, others will be used. In the present case, as barges become more expensive, rails and roads will be used. The measures being considered by the German government are intended to make those alternative media just a bit less expensive.
********This reminded me of a another logistics-related article that was sent my way: “Elwood, Illinois (Pop. 2,200), Has Become a Vital Hub of America’s Consumer Economy. And It’s Hell.” The New Republic. Ellwood is the home to CenterPoint Intermodal freight terminal, where shipping containers arrive by train, are offloaded to trucks, then “driven to warehouses scattered about the area, where they were emptied, [and] their contents stored. From there, those products—merchandise for Wal-Mart, Target, and Home Depot—were loaded into semis, and trucked to stores all over the country.” Not long after Intermodal opened in 2002, “Elwood became the largest inland port in North America.” Today, “Tens of thousands of semis” rumble through Will County, where Elwood is located, “every day, wreaking havoc on the infrastructure.” This article provides an excellent example of the warning “Be careful what you wish for.”
(22 January 2019): “For Trump Administration, It Has Been Hard to Follow the Rules on Rules” The New York Times
——–“Ever since President Trump took office, his appointees have directed federal agencies to draft regulations meant to delay or reverse policies of the Obama administration. Nearly all the proposals have been tripped up by the same arcane 1946 law governing administrative policies. . . . That law, the Administrative Procedure Act, was written to make sure that the executive branch followed some basic steps when it wanted to change policies. Over time, courts have given it additional teeth by requiring regulators to follow certain processes and conduct certain analyses before making changes. The Trump administration appears to have repeatedly failed to hew to those standards.”
********The article goes on to note that the Institute for Policy Integrity of the NYU School of Law has done an analysis showing that “more than 90 percent of court challenges to major Trump deregulatory actions have been successful so far. By the institute’s count, 30 big rules have been challenged, and the courts have found for the litigants 28 times.” Although the law “gives federal agencies a lot of latitude to write regulations, but it says that major actions have to follow certain steps. For big changes, agencies are supposed to go through what’s called ‘notice and comment’: They must issue a proposal, let the public respond with ideas, then incorporate feedback into a final version.” Evidently, “A lot of the losses came about because the administration skipped those steps, instead announcing that it would pause or reverse pending rules—or that some emergency conditions justified an instant regulatory change.”
May you have a good week!
Welcome to week 352! The articles below caught my attention this week. What are intended to be relatively objective “briefs” are preceded by dashes (——–), whereas additional material or relatively subjective comments are preceded by asterisks (********). Article titles preceded by [SR] require a subscription.
(2 January 2019): “Nudges, long aimed at saving behavior, are needed for people converting a nest egg into income” UCLA Anderson Review
********The idea of “nudge” comes from the Nudge: Improving Decisions About Health, Wealth, and Happiness, by Richard H. Thaler (a 2017 recipient of the Nobel Prize in Economics) and Cass Sunstein (who put nudges into practice in the Obama administration). In this article the research of Suzanne Shu is showcased, especially as it relates to the issue of “decumulation” in retirement. In the process some wise ideas from behavioral economics are lifted up and used to illustrate fundamental points. Especially important, I thought, was the notion of Full Retirement Age (FRA) for social security. For people of my age, FRA was 66. However, for each year in which social security payments are deferred up to 70.5, annual payments increase at 8% per year. What if our thinking was focused upon maximizing annual payments rather than FRA? Clearly many more people would put off receiving payments—perhaps defer retirement—until 70.5 rather than FRA. That clearly qualifies as a nudge. Much more to glean from this useful piece.
(7 January 2019): “Robert J. Shiller on Bubbles, Reflexivity, and Narrative Economics” Enterprising Investor
********This is a blog of The CFA Institute. CFA stands for Chartered Financial Analyst, which is perhaps the highest credential for those analyzing investments. This article is an interview with Nobel Laureate Robert Shiller, who is the author of Irrational Exuberance in which “he successfully called the dot-com bubble.” Subsequently, “he issued similarly accurate warnings about the bloated housing market.” The interview is of interview for learning the views of a thoughtful economist on current economic conditions. I was particularly interested in his (brief) discussion of “narrative economics,” which is evidently the title of a book he is working on. In the meantime, you might want to take a look at the presidential address he gave at the 2017 meeting of the American Economic Association. It’s title, “Narrative Economics,” is sure to be a good predictor of what is to come in his future book.
********According to Shiller in the core post of these comments, narratives provide “a convergence of the social sciences. Economists see themselves as trained in economics and are reluctant to get involved in sociology, psychology, anthropology, or history. . . . If you’re going to be involved with forecasting, you have to use every available perspective to stay in touch with reality.” He goes on to note, “The theme of my book is that there are new ways of thinking that are encouraged by stories that people tell. We communicate through stories that are salient or that appeal to us in our thinking. Typically they have a human interest component and often a political component. They often affect our thinking and our moral judgment.” Sounds like the invisible forces to me—I’ll be looking for his book.
(9 January 2019): “Big Dairy Is About to Flood America’s School Lunches With Milk” Bloomberg Businessweek
********The school lunchroom has long been a place where different views about nutrition and agribusiness interests have interacted with consequences. During the Reagan administration there was the “ketchup-as-a-vegetable controversy.” The Obama administration” backed the Healthy, Hunger-Free Kids Act” that directed the USDA “rewrite the nutrition standards of the $13.6 billion National School Lunch Program for the first time in 15 years. The department soon required more fruits and vegetables, more whole grains, and lower sodium levels. . . . In many ways this was a frontal assault on dairy: Cheese, especially the American kind popular on burgers, is high in sodium. The new rules even told schools to make water available with every meal—after decades when the only beverage kids were routinely offered was milk.” All this has changed with the Trump administration, and the 2017 appointment of Sonny Perdue as Secretary of Agriculture. Perdue, the “ex-Georgia governor who made his fortune in the grain business and was once a consultant to milk producers,” has eased restrictions on lunchroom food. Higher-fat chocolate milk is back, as is more white bread and pizza. Commenting to grade schoolers, with whom he ate lunch while announcing his changes, Perdue noted, “I wouldn’t be as big as I am today without chocolate milk.”
——–Changes brought about the USDA have been “a victory for many of the big food companies that count on schools as a steady source of revenue and see them as an opportunity to shape the buying habits of future consumers. The win is especially sweet for the $200 billion U.S. dairy industry, which has been in a self-declared crisis for years because of declining milk consumption. The shift has particularly unwelcome consequences for the one-third of American kids considered overweight or obese. It underscores the contradiction at the heart of the meals program, which is simultaneously trying to feed schoolkids healthful food while supporting agribusiness that want to pack the menu with their own products.”
********The article does a good job of laying out the conflicting aims of the USDA’s school lunch program, as well as showing how economic interest play a role. I did miss discussion, though, of the various purveyors no longer selling their products to schools. Were these smaller and perhaps more local, or what? The 2008 book School Lunch Politics: The Surprising History of America’s Favorite Welfare Program, by Susan Levine, looks like a promising entry into a deeper understanding of this subject. Levine is the Director of the Institute for the Humanities and Professor of History at the University of Illinois at Chicago.
(11 January 2019): “When Death was Women’s Business” JSTOR Daily
——–In early nineteenths century Pennsylvania, “care for the dying and dead fell mostly to women. In those years . . . watchers or watch-women—sometimes also referred to with the more generic term ‘nurse’—tended to the dying. These might be friends, family members, or hired help.” Over time, however, “women’s death work declined. Increasingly, people died in hospitals rather than at home. With the Civil War came the need to transport Union soldiers’ bodies home, inspiring the rapid growth of undertaking as a business—often a father-and-sons affair. Now families had a one-stop shop for coffin, burial plot, hearse, and the care and preservation of the body.” In an 1867 Philadelphia directory, there were “listed 125 male undertakes, one female undertaker, and four female layers out of the dead. The death industry as we know it today had been born.”
********Livia Gershon’s post is build upon the article, “’Painful Leisure’ and ‘Awful Business’: Female Death Workers in Pennsylvania,” by Karol K. Weaver, which can be downloaded at the end of the post. Interesting to see how the hospitalization of death and the Civil War helped change the nature of services provided and the gender of those providing the services.
(11 January 2019): “How Does Bail Work, and Why Do People Want to Get Rid of It?” The New York Times
——–“In 2017, around 33,000 criminal defendants in New York couldn’t post bail at their initial hearing. They went straight from a courthouse to jail simply because they were poor.” How does bail work? “After they are arrested, criminal defendants ordinarily see a judge within 24 hours. Judges have a number of choices for determining what happens next. The most lenient option is releasing defendants with a promise to return for their trial. The severest is ordering defendants, if they are deemed a flight risk, to be detained in jail until a trial verdict or plea deal. Bail provides a middle path: Defendants remain free but fact the threat of a financial penalty.” In the state of New York, “judges can choose from nine different types of bail, some of which require no upfront payment. Typically, however, judges favor cash bai, which calls for immediate payment to the court. If the court’s requirements are met, the bail money is returned to whoever put it up.”
********The article provides a clear look at some of the factors affecting the setting and paying of bail bonds and provides an articulate statement from someone in the bail bond industry of how they work. Changing the law, as California recently did, “creates levels of risk based on likelihood to show up in court and threat to the public, with some defendants guaranteed time in fail before their case id decided. Since these judgments are based on criminal history, and the criminal justice system has been riddled with bias,” risk assessment are “inherently bringing forward that racism and that discrimination.” So, although judges have a lot of leeway in making bail decisions, they are not without their problems. You can learn more about bail and what one nonprofit is doing the address it, using a revolving bail fund, here.
(14 January 2019): [SR] ’The Age of Surveillance Capitalism’ Review: The New Big Brother” The Wall Street Journal
——–Shoshana Zuboff’s The Age of Surveillance Capital: The Fight for a Human Future at the New Frontier of Power is the “rare volume that puts a name on a problem just as it becomes critical—in this case the quandary raised by Google and Facebook when they figured out how to fashion the data exhaust of our everyday lives into, as she puts it, ‘prediction products’: little oracles that anticipate our intentions and offer then up to anyone willing to pay.” According to Ms. Zuboff, the companies of surveillance capitalism “scoop up the date we leave behind as we go about our digital lives and use it to their own commercial ends. Our leftover data trails make up the resource she calls ‘behavioral surplus,’ a by-product that’s key to the success of two of the world’s most highly valued companies, Alphabet (Google’s parent) and Facebook, and increasingly Amazon and Microsoft.”
********Shoshana Zuboff is a “retired Harvard Business School professor.” The reviewer notes that “this book’s major contribution is to give a name to what’s happening, to put it is cultural and historical perspective, and to ask us to pause long enough to think about the future and how it might be different from today.” An earlier expression of Zuboff’s ideas is much shorter than the 525 pages of text (and many more of documentation) appeared in 2015: “Big other: surveillance capitalism and the prospects of an information civilization” Journal of Information Technology 30,1 (March 2015): 75-89. Although only the Abstract and References are available free of charge, they are sufficient to indicate the importance of Google Chief Economist Hal Varian as providing the “primary lens” for Zuboff’s analysis.
(16 January 2019): “Supreme Court ruling gives truckers a victory and a new weapon in labor war at L.A. ports” The Los Angeles Times
——–The U.S. Supreme Court in an 8-0 decision—Justice Kavanaugh did not participate—cleared the way “for drivers to sue trucking companies” even if the companies “consider them to be independent contractors rather than employees.” In the case at issue, New Prime Inc. v. Oliveira, New Prime “contended that its drivers could not sue because they had signed contracts agreeing to arbitrate any claims privately, waiving their right to go to court.” The Supreme Court noted, however, in a decision written by Justice Neil M. Gorsuch, “that the 1926 Federal Arbitration Act clearly carved out an exception for ‘workers engaged in foreign or interstate commerce.’ The exception was written into the law because Congress had enacted a different path for transportation worker disputes at the time.”
********The article goes on to note, “What is yet to be determined is whether the ruling has a much broader impact—specifically, whether is will influence pending federal class-action lawsuit against Amazon, Grubhub, Doordash, Postmates and other app-based platforms that classify drivers as independent contractors.” You can read the text of the 20-page decision here.
May you have a good week!
Welcome to week 351! The articles below caught my attention this week. What are intended to be relatively objective “briefs” are preceded by dashes (——–), whereas additional material or relatively subjective comments are preceded by asterisks (********). Article titles preceded by [SR] require a subscription.
(19 December 2018): “Surprise DNA Results Are Turning Customer-Service Reps Into Therapists” Bloomberg.com
——–“In the business of consumer DNA testing, customer service is sometimes a lot more like emotional support. Though genetic tests are frequently marketed as family-friendly entertainment, they sometimes wind up surfacing life-altering surprises. And when those surprises show up in someone’s test results, the first move is often a call to customer service.” Especially challenging are tests that reveal parents who aren’t parents and siblings who aren’t siblings. According to Kent Hillyer, the head of customer care of 23andMe, “We don’t really play the role of therapist, but rather listen and try to be sympathetic and empathetic, getting them to process things.” 23andMe receives so many of these challenging calls “that preparing for them is integrated into the company’s months-long training program.”
********An interesting example of one new job that the decreased cost of genetic testing has brought into existence. Clearly the people who answer these calls are doing emotional labor, a concept that gained currency through the work of sociologist Arlie Hochschild in her 1983 book The Managed Heart: Commercialization of Human Feeling. In 2012 the book became available in an updated edition with a new preface. More recently, Hochschild’s book Strangers In Their Own Land has drawn interest for its contribution to better understanding the 2016 presidential election.
(27 December 2018): “Two Towns Forged an Unlikely Bond. Now, ICE Is Severing the Connection” Bloomberg Businessweek
********A lengthy article that explores the connections between Mount Pleasant, Iowa and Chocox, Guatemala. It puts many human faces on the social and economic disruption—the human costs—of the enforcement of current immigration and employment laws by Immigration and Customs Enforcement.
(2 January 2019): “Now for the Hard Part: Getting Californians to Buy Legal Weed” The New York Times
——–“A billion dollars of tax revenue, the taming of the black market, the convenience or retail cannabis stores throughout the state—these were some of the promises made by proponents of marijuana legalization in California. One year after the start of recreational sales, they are still just promises. California’s experiment in legalization is mired by debates over regulation and hamstrung by cities and towns that do not want cannabis businesses on their streets.” Instead of increased sales from legalization, they have fallen. “Around $2.5 billion of legal cannabis was sold in California in 2018, half a billion dollars less than in 2017 when only medical marijuana was legal, according to GreenEdge, a sales tracking company.” Analysts say that “The easy part of legalization was persuading people to vote for it . . . The hard part, now that it’s legal, is persuading people to stop buying from the black market.”
——–As it turns out, California “produces far more pot than it can consume. The tons of extra cannabis continue to leach out across the country into states where it is legal.”
Recent official estimates of cannabis production in California report “the state producing as much as 15.5 million pounds of cannabis and consuming just 2.5 million pounds. California’s surplus—equal to 13 times Colorado’s total annual production—is smuggled eastward, especially across the Rockies and Mississippi where the wholesale price is as much as three times as high.”
********There is much of interest in this article. The revenue response in California seems consistent with an “inelastic” demand marijuana. In short, the legalization of marijuana brought forth such a strong increase in market supply that price fell, and total revenue fell, too. Have to check the data to see if this is what happened. Second, the article points to the coexistence and omnipresence of legal and illegal markets. Changes in the law simply tend to change their relative sizes.
(5 January 2019): “Water in Asia: After the Floods” The Economist
********This is a review of Unruly Waters: How Rains, Rivers, Coasts, and Seas Have Shaped Asia’s History, by Sunil Amrith, a professor of history at Harvard University. He notes that nowhere “has the search for water shaped or sustained as much human life as in India and China.” They have, between them, “perhaps 36% of the world’s population, but just 11% of its freshwater—and, in both countries it is distributed hugely unevenly.” Although the hydraulic priorities of the countries have differed, “their approaches have had much in common: the massive investment of labour, capital and technology in a drive to contain and control the forces of nature.” Thousands of dams built in both countries are only part of the story. Another part is the massive program of “linking and diverting rivers to mitigate the inequity of nature’s distribution. Thanks to the most expensive infrastructure project the world has ever seen, two-thirds of Beijing’s tap-water now comes from a reservoir in central China, nearly 1,500km (930 miles) away. India has dreams of ‘interlinking’ 37 rivers through 14,000km of canals.” A third part is the enormous volume of water removed from underground. As the reviewer notes, there are both inspiring and alarming aspects of the attempts of India and China to control their unruly waters, but it is especially disconcerting to consider that “these strategies have run their course, and indeed are now causing new problems.”
********This looks like a fascinating book, with much to reflect upon. It makes me think about the classic Cadillac Desert: The American West and Its Disappearing Water, by Marc Reisner, and two more recent books: The Death and Life of the Great Lakes, by Dan Egan, and The Great Lakes Water Wars, by Peter Annin. What libraries of books could be written about the situation described in India and China. One further book to mention, which was mentioned in the book review [SR] “’Unruly Waters’ and ‘Ganges’ Review: In India, Water Is Politics” The Wall Street Journal. The book is Ganges: The Many Pasts of an Indian River, by Sudipta Sen. “Mr. Sen goes to great lengths to show that the Ganges, with its ‘rich and boisterous mythology,’ is a river like no other in the world. . . . The only other ‘venerated body of water with similar universal salience and mythic geography,’ he notes, is the River Jordan. And yet the scale of the veneration of the Ganges makes the Jordan seem trivial by comparison.” But Mr. Sen laments, “that India’s great river is in trouble, suffocated by dams, overcrowded, and polluted.” In ending, he asks “Will the Ganges survive its burdens of human and industrial contaminants?” The future of the Ganges is in the hands of “Mother India.”
(8 January 2019): “Flipping the Economics of Paying for Education, Because They’re Upside Down” The New York Times
——–“Student debt reached a new height last year—a whopping $1.5 trillion. A typical student borrower will have $22,000 in debt by graduation, according to the National Center for Education Statistics. Now, Silicon Valley is backing a novel idea that proposes to rewrite the economics of getting an education. The concept is deceptively simple: Instead of charging students tuition—which often requires them to take out thousands of dollars in loans—students go to school for free and are required to pay back a percentage of their income after graduation, but only if they get a job with a good salary.” Such Income Share Agreements (ISAs) have “been experimented with and talked about for years. But what’s happening at Lambda School, an online learning start-up founded in 2017 with the backing of Y Combinator, has captivated venture capitalists.” Purdue University has also developed “a version of an Income Share Agreement. The ISA approach treats “students as investments rather than cash cows—a fundamental shift that could finally lift the crippling debt load we routinely push onto students. But it also comes with a peculiar kind of danger: By seeking safe investments, programs like this could cast aside the strides made to expand educational opportunities to higher-risk students and reduce the appeal of educations that focus on noble, but lower compensated, professions.”
********As one would expect, there is a growing literature on Income Share Agreements. The article “How Loan-Averse Young Adults View Income Share Agreements” American Institutes for Research seems like a good entry into learning more. Among other things, it has an extensive set of references. It strikes me that educational institutions that move toward ISAs are trading a relatively certain cash flow—tuition while students are enrolled—for a relatively uncertain cash flow—a share of earnings after the end of the program. I suspect this would lead such institutions to choose students differently in order to reduce the risk of their student investments. You can learn more about the American Institutes for Research here.
(8 January 2019): “You Know Your Diamond’s Cut and Carat. But Does It Have Ethical Origins?” The New York Times
——–“Consumers want to know the origin of the things they buy, like the name of the farm that supplied their milk or the source of the feathers in a down jacket. But when it comes to a diamond—quite likely one of the most expensive and emotional purchases a jewelry buyer will ever make—most know next to nothing about the source of the stone. Tiffany & Company, which sold more than $500 million worth of diamond engagement rings in 2017, is hoping to change that. Beginning Wednesday, it will start a program that will identify for customers the country where their diamond was mined, and, eventually, information on where it was cut, polished and set.”
********Knowledge of the production supply chain, it seems, will be increasingly bundled with the product itself for some goods and services. I suppose that is already true of most professions—one sees the degrees of one’s doctor, dentist, or lawyer on their walls. But goods seem later to the party. What sort of factors of the good will affect the extent to which supply chain information is provided? No doubt the price of the good will matter, as will the complexity of the supply chain. Will there penalties for falsifying—or simply making a mistake—about the nature of the supply chain? That will matter, too.
(9 January 2019): “As Big Retailers Seek to Cut Their Tax Bills, Towns Bear the Brunt” The New York Times
********The centerpiece of this story is the “dark-store theory” of property valuation that is increasingly being used in legal arguments against municipalities by big-box stores to lower their property taxes. In brief, stores are arguing that the proper comparison for determining their property value for tax assessment purposes are vacant stores. Usually these stores are in other locations than the specific location of the store being assessed. The states of Michigan and Wisconsin have figured prominently in the legal arguments but there are many other states where dark-store theory is at work. CityLab has a map of those states as well as much additional and accessible information. If you look at the map, you will see that North Carolina has had tax appeals based on dark-store theory. A review of recent court decisions, including North Carolina, is provided by the UNC School of Government, which cites a case in Forsyth County.
********One longs for a systematic examination of these assessment matters. The International Association of Assessing Officers (IAAO), which is the membership organization for assessment professionals, provides one. Here is an overview of the matters and here is the lengthier—30 pages—examination. I first became aware of this issued from a December 2016 article in Bloomberg.com.
May you have a good week!
Welcome to week 350! The articles below caught my attention this week. What are intended to be relatively objective “briefs” are preceded by dashes (——–), whereas additional material or relatively subjective comments are preceded by asterisks (********). Article titles preceded by [SR] require a subscription.
(14 December 2018): “The Farm Bill, hemp legalization and the status of CBD: An explainer” Brookings
********The recently passed, and signed, 2018 Farm Bill has been touted as a new day for hemp production and hemp-derived products in the United States. One of those products cannabidiol (CBD) seems to be showing up everywhere. A little country store not far from where I live sells it and driving home from Asheville recently, I noticed a prominently-signed building that will be featuring CBD. In light of all this, this post by Brookings writer John Hudak, is essential reading; Hudak is the author of Marijuana: A Short History.
********Perhaps the most important thing to note is this: “One big myth that exists about the Farm Bill is that . . . CBD . . . is legalized. It is true that section 12619 of the Farm Bill removes hemp-derived products from its Schedule I status under the Controlled Substances ACT, but the legislation does not legalize CBD generally. . . . The Farm Bill ensures that any cannabinoid . . . that is derived from hemp will be legal, if and only if that hemp is produced in a manner consistent with the Farm Bill, associated federal regulations, . . . [associated] state regulations, and by a licensed grower. All other cannabinoids, produced in any other setting, remain a Schedule I substance under federal law and are thus illegal.” Although there is one minor exception, there are a lot of conditions to be met to ensure federal legality. The article illustrates well the complex web of relationships between state and federal law, as well as the challenges in moving across the ever-shifting boundary between illegal and legal products.
(27 December 2018): “Huge laundry detergent bottles were designed for store shelves. For Amazon, they’re shrinking” The Los Angeles Times
——–“Amazon’s rise is making laundry detergents shrink. Tide and Seventh Generation have introduced redesigned laundry detergents that are several pounds lighter by cutting down on plastic in their packaging and using less water in their formulas. They’re making the changes to please Amazon.com Inc. and other online stores: Lighter packaging means retailers pay less to ship the detergent to shoppers’ doorsteps, making each sale more profitable. For consumers, the new packaging has been designed to better survive shipping without leaking. The challenge, however, is getting online shoppers to buy detergent that looks nothing like the heavy bottles they are used to.”
********This indicates that Amazon now has sufficient market power to bring about changes in its supply chain, something that many firms have and do. This brings to mind the 2006 book The Wal-Mart Effect: How the World’s Most Powerful Company Really Works—and How It’s Transforming the American Economy, which I got a lot from when I read it not long after its release. What this article points toward is a book that does for Amazon what The Wal-Mart Effect did for Wal-Mart. The closest I was able to find is the well-regarded 2013 book The Everything Store: Jeff Bezos and the Age of Amazon, by Brad Stone, which was The Financial Times Best Business Book for 2013. You can read more about it here. Steve Wasserman’s article “The Amazon Effect” The Nation, provides a glimpse of what a book-length work on Amazon’s effect on the world might contain.
(28 December 2018): “A call to save democracy by battling monopolies” The Washington Post
********This is a review of The Curse of Bigness: Antitrust in the New Gilded Age, by Tim Wu, a policy advocate and law professor at Columbia University. The reviewer is Benjamin C. Waterhouse, an associate profess of history at UNC Chapel Hill. Wu argues that “global concentration is now at levels unseen in more than a century . . . . [and] offers a vital diagnosis: American has abandoned its rich tradition of anti-monopoly, or antitrust, law. And while the very term ‘antitrust’ may strike many as dreadfully dry, Wu manages to make this brisk and impressively readable overview of the subject (the entire text runs abut 140 pages) vivid and compelling.” The review includes many names that will be familiar to those, like me, who have only a cursory knowledge of the field.
(28 December 2018): “Twelve leading economists on the research that shaped our world in 2018” Quartz
********The 12 leading economists mentioned 11 articles that stood out for them and provided some notes about why they did. In some cases pdfs of the articles are available. What stands out is the breadth of the articles and the extent to which they relate to contemporary social problems. Quartz compiled a similar list in in 2017—13 economists noted 13 articles. Here is the link. I have spent much time comparing the two lists, but I did notice that the Moving to Opportunity study was addressed in each year. You can learn more about MTO here. No doubt this caught my eye because I am just a few minutes away from completing Matthew Desmond’s impressive book Evicted: Poverty and Profit in the American City. Milwaukee, Wisconsin is that American city.
********I do hope you will take a look at the articles. One from 2018 struck me: “Ban the Box, Criminal Records, and Racial Discrimination: A Field Experiment,” by Amanda Aga and Sonja Starr. Here is its Abstract. Their work confirmed “that criminal records are a major barrier to employment: employers that asked about criminal records were 63% more likely to call applicants with no record. However, our results support the concern that BTB [Ban the Box] policies encourage racial discrimination: the black-white gap in callbacks grew dramatically at companies that removed the box after the policy went into effect. Before BTB, white applicants to employers with the box received 7% more callbacks than similar black applicants, but BTB increased this gap to 43%.” Asheville, North Carolina adopted BTB in early 2016.
(28 December 2018): “Four questions for the Year Ahead” The New York Times
********N. Gregory Mankiw asks, “What’s in store for the year ahead? Like all economists, I really don’t know. . . . [But here] are four questions we may learn the answers to in the months to come.” (Read the brief article for elaboration.) When will the Fed stop? At some point Fed policymakers will need to put the brakes on the federal funds rate. How will the trade shenanigans end? The belligerent approach of the current administration is worrying to the trading partners of the United States. Will someone pay attention to festering problems? “Tw such problems are global climate change from human carbon emissions and the looming fiscal imbalance as more baby boomers retire and start collecting Social Security and Medicare.” Which economic advisers will have the president’s ear? Kevin Hassett of the Council of Economic Advisers and Larry Kudlow of the National Economic Council are knowledgeable (Hassett) and have good instincts (Kudlow). “But it is unclear how much the president listens to them. . . . Making matters worse is the role of Peter Navarro, a relatively unknown economist who became a presidential adviser because his idiosyncratic views on trade are consistent with Mr. Trump’s isolationist leanings.”
********In relation to the “festering problems” question, here are two related articles. First there is, “Forget the Carbon Tax for Now,” The New York Times, which notes that although a carbon tax is arguably the economically efficient approach to moderating climate change, it is politically untenable. Second, there is “Why the World Needs to Rethink Retirement,” The New York Times, the short answer for which is global population is aging and people are living longer on average. The article provides a look at retirement provisions in nine prominent countries.
(1 January 2019): “A 6-Pack of Beer for $26? Qatar Doubles the Price of Alcohol” The New York Times
——–“Getting a beer has never been easy in Qatar. But buying a six-pack will now set you back at least $26, thanks to an alcohol tax that went into effect on Tuesday. . . . A 100 percent tax, calculated on the previous sales price, has been imposed on all alcohol imports,” according to a letter to customers from “the country’s sole liquor retailer, the Qatar Distribution Company.” The tax increase seems “to be part of a push to clamp down n ‘health-damaging goods,’ according to a statement released last month by the Ministry of Finance that did not mention alcohol. The new tax will increase the price of sugary drinks by half, while the price of tobacco, alcohol, energy drinks and pork will double,” according to a phone call with Walid Zidani, who is employed by the ministry.
********A glimpse of how alcohol is managed and taxed in an Islamic country with a “unitary constitutional monarchy” with a 2017 population of 2.6 million, which is not quite the population of Chicago. The article notes that the 2022 men’s soccer World Cup will be hosted by Qatar and many are wondering “how much Qatari society might bend to accommodate guests who view drinking as a central part of the World Cup experience.” As with all sumptuary laws, this is tax increase on alcohol is a constellation of the invisible forces.
(1 January 2019): “Women’s magazines are dying. Will we miss them when they’re gone?” The Washington Post
********An examination of the so-called “pivot to digital” for women’s magazines, the most recent casualty being Glamour, which decided in late November to “stop publishing its glossy monthly.” Although some of the pivot is being driven by the relative cost of digital vs. print, as well as the movement of advertising from print to digital, it seems like larger cultural trends are at work.
May you have a good week!