The Invisible Forces comprise a system that influences and is influenced by human behavior.  This system is made up of the invisible hand (economic forces), the invisible foot (legal and political forces), and the invisible handshake (social and historical forces).  The invisible forces stem from David Colander, Microeconomics, 2nd ed. (1995), pp. 17-19. The Invisible Forces Weekly is the work of Bruce Larson.  Its purpose is to provide a broader view of economics by considering human behavior, as reported online, in light of the invisible forces.

374 (19 June 2019)

Welcome to week 374!  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.

(12 June 2019):Martin Feldstein, 79, a Chief Economist Under Reagan, DiesThe New York Times

********The passing of Harvard economist Martin Feldstein was much covered by all the major media outlets this last week.  This article provides a nice overview of his work, including his work as an advisor for multiple presidential administrations.  Perhaps most impressive, though, is the roughly 30 years he served as a transformative president of the National Bureau of Economic Research.  For a look at Feldstein as teacher and mentor, the article “The economist who connected across politicsThe Harvard Gazette is worth reading.  I was especially impressed by this: Feldstein “advocated hard for the public policies he believed in, but taught, mentored, and advanced people without regard to his own views.”

(13 June 2019):Free Exchange: Votes of ConfidenceThe Economist

********This is basically a review of Democracy and Prosperity: Reinventing Capitalism through a Turbulent Century,” by Torben Iversen and David Soskice, a book that provides reasons why those countries that get into the “club of rich democracies . . . tend to stay there.  Since the dawn of industrialization, no advanced capitalist democracy has fallen out of the ranks of high-income countries or regressed permanently into authoritarianism.”  The authors argue that “capitalism and democracy as potentially mutually supporting, with three stabilizing pillars.  One is a strong government, which constrains the power of large firms and labour unions, and ensures competitive markets. . . . The second is a sizeable middle class, forming a political bloc that shares in the prosperity created by a capitalist economy. . . . [and] a third pillar . . . large firms that are not very mobile.”  Although one might quibble with the details of their argument, “the overarching story—immobile companies giving governments a degree of sovereignty, which they self-interestedly use to boost the middle classes—seems a plausible account of the stability of advanced capitalist democracies.”  That being said, “It leaves plenty to be concerned about, [as it] hinges on the middle classes feeling confident about the economy.”

********The word ‘pillars’ reminded me of the recent book The Third Pillar: How Markets and the State Leave the Community Behind, by Raghuram Rajan.  It seems that the invisible forces—economic forces, legal and political forces, and social and historical forces—are also pillar-like.  What these three ways of looking at things seem to share is a sense of system, i.e., the pillars are interdependent, and that there is a broader sense of equilibrium for the system than that of the economy (market) itself.  This idea of a general social equilibrium is most familiarly developed by engineer-economist-sociologist Vilfredo Pareto in his four-volume 1916 work Mind and Society.   

(14 June 2019):I’m a Financial Journalist Who Was Bored Silly by Mergers.  Not Anymore.The New York Times

********This article relates how reporter Peter Eavis came to think that reporting on mergers is of general interest.  First, there is the rise of big tech companies like Facebook and Google that are enormously profitable.  But second, there is increasingly a sense that “people in power might do something.  For reporters, antitrust action is far more interesting than antitrust theory, and President Trump has raised the prospect that he might take a more aggressive antitrust approach.”  Finally, it seems like “the antitrust debate will be in the air for some time.”  Now, “when a big deal comes up, reporters might best serve readers by looking closely at whether it will hurt competition, squelch innovation or have other ill effects.  The days of relying on the insights of stock analysts and investors, who are typically much more focused on whether the merger will bolster the stock price, are over.” 

(17 June 2019):Climate Change Is Coming for the $3.6 Billion Cognac BusinessBloomberg Businessweek

——–“Since at least the 15th century, the gentle hills of the Cognac region in southwestern France with the Ugni Blanc vine, which yields an acidic, yellowish-white grape.”  After processing, including two distillations, the resulting “liquid is poured into barrels made of oak from nearby forests, to emerge anywhere from 2 to 200 years later as the brandy known globally as cognac.  Climate change threatens all that.  Warmer summers and longer growing seasons mean the grapes get sweeter and less acidic on the vine, which dramatically changes the character of the wine, and thus the cognac it makes. . . . And European Union provenance laws mean producers can’t simply move to higher-and cooler-ground outside the region and still call the harvest cognac.”  As a result, cognac producers are spending significant sums on research to identify vines that will enable them to continue to produce cognac familiar to consumers.

********One producer, BNIC, says that “each increase of 1C (1.8F) in maximum daytime temperature during the growing season accelerates the harvest by about 10 days.”  Concerns about grape quality “began to mount in the early 2000s, when several exceptionally hot and dry summers resulted in September harvests—about a month earlier than usual—and unusually sweet grapes.” 

********The above story of change differs dramatically from the story of constancy in “A French Wine With a 900-Year-Old VintageThe New York Times.  It notes that “Savagnin blanc—not to be confused with the sauvignon blanc the sommelier recommended with your cheese course—as a fruity, acidic grape from the vine-encrusted hills of Jura, near France’s border with Switzerland.  And if you visit and sip the region’s white wines today, you’ll be tasting the exact same grape, down to the genetic level, that has gone into its wines for at least 900 years.”  This statement is backed up by a study just published in Nature Plants.  Its findings “reinforce how winemakers can devote centuries, if not milleniums, or loyalty to certain varieties of grapes.  Faced with the choice of letting nature take its course and allowing new grape varieties to develop, or sticking with a reliable fruit by grafting vines to create perfect clones, most growers have spent the last 10 or 20 centuries learning how to better produce what works.”

(17 June 2019):World’s Top Bicycle Maker Says the Era of ‘Made in China’ Is

********This is an article on the trade war between the U.S. and China, and how once company—Giant Manufacturing—is adapting to it.  The first two paragraphs provide a clear statement of the words of President Trump and how Giant’s chairwoman Bonnie Tu has responded to them.

Giant Manufacturing Co. saw the writ on the wall early on.  The world’s biggest bicycle maker started moving production of U.S.-bound orders out of its china facilities to its home base in Taiwan as soon as it heard Donald Trump threaten tariff action in September.  ‘When Trump announced the plan of 25% tariffs, we took it seriously,’ Chairwoman Bonnie Tue said in an interview at Giant’s Taichung City headquarters in Taiwan.  ‘We started moving before he shut his mouth.’

As Wu goes on to note, “The world is no longer flat,” a reference to Thomas Friedman’s book The World is Flat, “The concept is no loner affordable in every place.”  If “a level playing field” is no longer the appropriate metaphor for companies and trade, what is?  What word should fill in the blank of The World is ________? 

(18 June 2019):Quicktake: Why Facebook Is Minting a Coin and How You Can Use

********Here is a brief look at the essential ideas behind and characteristics of Facebook’s proposed cryptocurrency—like Bitcoin—called Libra.  As news reports indicate, the scale of Facebook’s operations gives Libra a credibility that cryptocurrencies generally lack.  One of the characteristics of note is that Libra “is a so-called stablecoin, 100% backed by a basket of securities and fiat currencies, such as the dollar, euro, pound and yen.  Because these fiat currencies don’t fluctuate in value much, the Libra coins’ value” will likely not fluctuate much, too.  Read points (5) and (6) in the article to learn more about stablecoins.  There will be a lot of discussion about Libra in the months ahead.

May you have a good week!


373 (12 June 2019)

Welcome to week 373!  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.

(20 May 2019):How Legalization Changed Humboldt County MarijuanaThe New Yorker

——–“For more than forty years, the epicenter of cannabis farming in the United States was a region of northwestern California called the Emerald Triangle, at the intersection of Humboldt, Mendocino and Trinity Counties.  Of these, Humboldt County is the most famous.  It was here, in hills surrounding a small town called Garberville, that hippies landed in the nineteen-sixties, after fleeing the squalor of Berkeley and Haight-Ashbury.”  Over time, they learned how to produce marijuana and avoid arrest, and pursued a life of voluntary simplicity.  Things began to change, however, when California passed Proposition 215 in 1995, which “exempted patients and caregivers from criminal marijuana laws” and Proposition 64 in 2016, which legalized marijuana use more generally.  Since then, Humboldt County hasn’t been the same.

********A fascinating look at some of the consequences of marijuana legalization in Humboldt County.  The County thrived when marijuana was illegal, but the laws were weakly enforced, in contrast to now when marijuana is legal and relevant laws are rigorously enforced.  Among other things, the article points to the consequences of incorporating a relatively isolated area into a broader region via legal change that also led to much more extensive market integration

********The greatest integrator of markets, of course, is the Internet.  If you can connect to the Internet (and all you need is a satellite linkage and a source of electricity) you can connect from anywhere.  That makes stories like “They Just Won’t Die: Dark Web Drug Sellers Resist Police Crackdowns” in The New York Times of related interest.  Although Dark Web sites where a cornucopia of drugs are sold clandestinely are continually being taken down by legal authorities, “the fight against online drug sales is starting to resemble the war on drugs in the physical world: There are raids.  Sites are taken down; a few people are arrested.  And after a while the trade and markets pop up somewhere else.”  Whac-A-Mole provides a model for so many things.

(1 June 2019):New Study of Old Real Estate Bubbles (1582-1810) Finds Two Surprising Similarities With Modern BubblesReal Estate Decoded

——–“Amsterdam had three large real estate bubbles from 1582 to 1810.  The real estate market was entirely different 200-400 years ago but those Amsterdam bubbles shared at least two similarities with modern real estate bubbles.  Changes in the amount of mortgage money chasing homes, however, was not one of the similarities because mortgages were uncommon in Amsterdam back then.  Credit booms are not necessary for real estate booms but an increase in the amount of money chasing homes is.”

********The post is based on a working paper by Ph.D. candidate Matthijs Korevaar of Maastricht University.  You can read its 57 pages here.  Korevaar looked at 164,000 home sales in Amsterdam from 1563 until 1811 and found three real estate bubbles from 1604 to 1810 where “House prices doubled or tripled and then fell back to their initial values.  Each bubble lasted decades.”  So what are the two similarities?  They seem to be: (1) the natural “extreme” inelasticity of the supply of houses, and (2) price momentum.  One supply-side factor and one on the demand side.  What might the data reveal, say, for Asheville, North Carolina?

********It was interesting to read that the reason that the time series of Amsterdam housing prices came to an end is that Napoleon annexed Holland in 1811 and “the land title system changed.”  Another post I read this week also showed the impact of Napoleon: “How War Revolutionized Ireland’s Linen IndustryJSTOR Daily.  As there noted, “During the Napoleonic Wars, Irish women, who had traditionally only spun flax into thread, took over the traditionally male job of weaving linen as well.”  The image of “Rosie the Riveter” is famous in the U.S., but many such Rosies lost their jobs when GIs returned after WWII ended.  But in Ireland, “when soldiers returned to civilian life . . . The market was too hot, even with the massive drop in war demand.  By 1851, at least a third of Irish linen weavers were women.”  The foundation article for the post, “War, Gender, and Industrial Innovation: Recruiting Women Weavers in Early Nineteenth-Century Ireland,” can be accessed at the end of the post.

(4 June 2019):’Food deserts’ become ‘food swamps’ as drugstores outsell major grocersThe Guardian

——–“In 2017, CVS held a 3.9% share of the grocery market.  Walgreens came in at 2.4%.  That may not seem like much, but it far outpaced both Whole Foods and Trader Joe’s, which had 1.4% and 1% respectively.  The eyebrow-raising figure probably comes down to an issue of scale—last year CVS and Walgreens each had close to 10,000 stores in the US, while Trader Joe’s and Whole Foods each had fewer than 500 locations.  While the ubiquitous nature of pharmacies may help fill the grocery gap where affordable options are scarce, some researchers are concerned that this low-priced convenience comes with a high cost.”

********I found the grocery market shares of CVS and Walgreen’s to be very surprising; the 2016 information came from Business Insider by way of UBS.  A broader view of the market for groceries is provided by prolific food writer Michael Ruhlman in his 2017 book Grocery: The Buying and Selling of Food in America.

(6 June 2019):The Car Industry Is Under SiegeThe New York Times

——–“The internal combustion engine is under attack from electric challengers.  Car ownership is becoming optional in the age of Uber.  Regulators around the world are fining companies that don’t do enough to cut carbon dioxide emissions, even as buyers demand gas-guzzling S.U.V.s.  Global auto sales are slipping for the first time in a decade, disrupted by President Trump’s escalating trade war. . . . New technology has unraveled industries like entertainment, media, telecommunications and retailing, weakening the job security of millions of workers and helping to fuel populism.  Carmakers, clearly, are next.”  The stakes are high as established companies “like Volkswagen, General Motors or Toyota are among the last employers that operate vast factories where thousands of workers pour in and out of the gates at shift changes.  Worldwide, eight million people work directly for auto manufacturers, and many times more work for companies that supply brakes, tires, sensors and other components.”

********As the article notes, “Increasingly, car ownership is a luxury rather than a necessity.”  Contributing to the rethinking about cars is “the emergence of climate change as a potent political issue, as well as worsening air quality in major cities.”  Evidently potential fines from failing to meet the fuel economy requirements of the European Union—57 miles per gallon by 2021—is one of the factors driving the (now aborted) merger of Fiat Chrysler with Renault.  All in all, a nice summary of the “perfect storm” in which the auto industry finds itself. 

********I thought this interview with Ryan Popple, the CEO of electric bus producer Proterra, provided some useful perspective.  In particular it stresses the importance of the routine nature of bus procurement, routine in the sense that not much thought is given to it.  A correspondent pointed out to me that electric school buses are natural, as they run in the morning and the afternoon, and have plenty of recharge time in between.

(6 June 2019):Advertising may make people miserable, but it still has its usesThe Economist

********This article plays upon the familiar ideas of the two economic functions of advertising—information and persuasion, especially the latter.  In doing so it brings up forthcoming research by Chloé Michel, Michelle Sovinsky, Eugenio Proto, and Andrew Oswald, which “attempts to unpick the effect of advertising on welfare.”  They found that “a doubling of ad spending is associated with a subsequent drop in reported satisfaction of 3% . . . their findings may illustrate an aspect of the economy that has puzzled some economists for more than a century.” In his 1899 book The Theory of the Leisure Class, Thorstein Veblen “argued that consumption is not merely about satisfying needs, but it is also used to signal status and prestige.”  One might say that every product has the possibility of function AND distinction, but the desirability of most products is strongly dominated by function, with distinction playing little or no role.  As the article notes, “For goods to grant high status, there must be consumers who want but cannot have them.  Ad campaigns featuring sleek cars bedecked with oversized bows add to the value of luxury brands by informing the masses of how desirable they are—and how inaccessible.”  The article concludes noting that ”Perpetual dissatisfaction may well boost economic growth by keeping highly productive workers who might otherwise enjoy more time with their families chained to their desks.  But it is a funny sort of prosperity that depends on people never being satisfied with their lot.”

********For a book that provides a valuable counterpoint to the perpetual dissatisfaction of contemporary workers, Stone Age Economics, by Marshall Sahlins, has much to offer.  First published in 1972, the book is a “classic of modern anthropology and arguably one of the founding works of anthropological economics. . . . Sahlins concludes, controversially, that the experiences of those living in subsistence economies may actually have been better, healthier and more fulfilled than the millions enjoying the affluence and luxury afforded by modern industrialization and agriculture.”  I ran across Sahlins’s book in a call for papers on “Marshall Sahlins’s Stone Age Economics, a Semicentenary Estimate.”

(8 June 2018):Here’s a Guide to the U.S. Antitrust Case Against Big Tech

********Big Tech in this instance is Apple, Facebook, Google, and Amazon.  This article takes a look at recent investigations against these four companies and summarizes The Case against each of them and The Defense of each of them.  This is a good way to get up to speed on current and potential inquiries by the federal government in relation to them.  The House Judiciary Committee began its investigation on Tuesday, June 11th, with a focus on how traditional journalism has been affected by the loss of ad revenues to Facebook and Google.  You can learn more about the investigation in this article in The New York Times.

(9 June 2019):A Drama of Trump’s Own Making Ends With a Familiar HeroThe New York Times

********To me what is interesting about this article is its suggestion that the president uses threats as a tactic to further larger ends.  Take tariffs on Mexico as an example.  “Nine days in spring offered a case study in Mr. Trump’s approach to some of the most daunting issues confronting him and the nation: When the goal seems frustratingly out of reach through traditional means, threaten drastic action, set a deadline, demand concessions, cut a deal—real or imagined—avert the dire outcome and declare victory.”  The Wall Street Journal makes a similar point in [SR]For Trump, Threats Become Part of Diplomatic Playbook” (9 June 2019).  Are these threats effective?  It depends whether they are credible or not.  Credible threats are behavior influencing but non-credible threats, i.e., threats that one doesn’t believe will be acted upon are not.  There is a nice discussion of these two types of threats in a post by Presh Talwalkar.  Presumably there is some type of learning that takes place in the threat making.  As more empty threats are made, the more likely they will be viewed as non-credible.

********This article led me to think about market movements brought on by presidential threats.  Presumably one could catalog and time the threats made by the president and see how, say, the stock market responded.  Does the type of threat matter, e.g., a military threat or an economic threat?  Does repeated threat-making lead to reduced market response of a particular type?  To my mind, oral or tweeted threats is a type of “jawboning” made familiar during the administration of president John F. Kennedy when he took on U.S. Steel.  An article that explores Kennedy’s jawboning of U.S. Steel will Trump’s comments toward Amazon can be found here

********The Economist has also picked up on the theme of President Trump’s weaponization of the U.S. economy.  Check out its June 6th option piece “Weapons of mass disruption.”

(10 June 2019):Welcome to the Age of Surveillance

********The term ‘surveillance capitalism’ seemingly entered public vocabulary with the January 15th publication of Shoshanna Zuboff’s book The Age of Surveillance Capitalism.  Much attention was given to the book when it was published.  This piece by Noah Smith explores a bit more some of the darker uses of surveillance capitalism.  Some of these uses are well-known, e.g., ad targeting.  Some of these are less well-known—price discrimination, i.e., charging different prices to different people based upon some criteria, and “the ability to deny people essential services based on their past deeds.”  Those past deeds could conceivably be based upon identity, as in “the chance that Uber drivers will systematically give lower ratings to riders of races, religions or genders they don’t like.”  As Davis sees it, “Surveillance and control by corporate behemoths requires an even greater leviathan to balance it out.  Governments in free countries must place limits on the amount and types of data companies are allowed to collect on citizens, the ways they are allowed to transfer that data, the length of time they are allowed to retain it, and the harshness of the consequences they can impose on people because of it.”  But government surveillance “is known to be fairly ubiquitous.”  What leviathan will oversee it?

(10 June 2019):What Boy Band Sensations BTS Can Teach Us About

********This is a 35-minute podcast with a highly misleading title: BTS is scarcely mentioned; a BTS video can be viewed here.  So what is the podcast about?  Essentially it explores the close relationship between the South Korean government and private industry in the intentional development of cultural goods aimed at a global audience.  In the U.S. this has been scornfully called, by some, as “picking winners.”  But that doesn’t seem to be a problem in South Korea, which though market oriented also has the capability of operating as a command economy.  This approach reminded me of indicative planning, although perhaps the French term dirigisme captures things better.  Whatever the correct term, South Korea has made a great success out of its directed efforts to develop cultural goods for a global audience.  Evidently the inspiration for all of this was the commercial success of the movie Jurassic Park.

********The guest interviewed for the podcast is Euny Hong, who wrote The Birth of Korean Cool: How One Nation Is Conquering the World Through Pop Culture.  The book was published in 2014 and looks to be historically informed and entertaining.  You can learn more about Hong here.

(11 June 2019):’The migration problem is a coffee problem’The Washington Post

——–“Guatemala is now the single largest source of migrants attempting to enter the United States—more than 211,000 were apprehended at the Southwest border in the eight months from October to May.  Here is western Guatemala, one of the biggest factors in that surge is the falling price of coffee, from $2.20 per pound in 2015 to a low this year of 86 cents . . . Since 2017, most farmers have been operating at a loss, even as many sell their beans to some o the world’s best-known specialty-coffee brands.  A staggering number of those farmers have decided to migrate.”

********A very clear story about one cause of migration to the U.S.—loss of economic opportunity at home, in this case driven by falling prices in global coffee markets.  Whenever I read stories like this, I am always led to think about The Camp of the Saints, by French author Jean Raspail.  Wikipedia describes it as “controversial and has often been denounced as racist and xenophobic, especially due to its anti-immigration themes.”  The book “depicts the destruction of Western civilization through Third World mass immigration to France and the West.” 

May you have a good week!


372 (5 June 2019)

Welcome to week 372!  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. 

(25 May 2019):What Are Frontier Markets and Why Invest in Them?Bloomberg Businessweek

——–[This is a QuickTake.]  “If emerging markets are the wild child of the investment family, offering potentially higher rewards in return for greater risk, then what about their small sibling, frontier markets?  These include countries such as Sri Lanka, Kazakhstan and Nigeria where stock exchanges and currency markets are too small or underdeveloped to be classified as emerging markets.  While frontier markets may bring investors more exotic thrills, and spills, they also somewhat counterintuitively can be a safe haven when markets are rocky.”

********This QuickTake follows the usual format, i.e.,  concise and clear statements of essential points.  Investors discern three types of markets: developed, emerging, and frontier.  A lengthier discussion of the three types can be found here.  Perhaps the most interesting point is “6.  How are they [frontier markets] safe havens?”.  Frontier markets are “less correlated with one another due to their geographic diversity.”

(29 May 2019):Single Mothers Are Surging Into the Work ForceThe New York Times

——–Since 2015, “something surprising has happened: The  share of young single mothers in the work force has climbed about four percentage points, driven by those without college degrees . . . It’s a striking rise even compared with other groups of women who have increased their labor force participation during this period of very low unemployment.  The last time single mothers’ labor force participation grew so rapidly was during the 1990s, driven by a thriving economy and major federal policy changes, including welfare overhaul and tax incentives.  In recent years, though, there has been no new federal policy that would obviously encourage single mothers to work in large numbers.  Instead, they seem to be responding to a patchwork of policies, both carrots and sticks.  At the federal level, the safety net has become less reliable, so working for pay is increasingly their only option.  But at the local one, new policies like paid leave and minimum wage increases have made it more feasible for single mothers to work.  Together, these appear to have primed them to take advantage of the biggest driver of all: a highly competitive labor market.”

********A lengthy article that relates many of the institutional factors affecting the employment of single mothers.  As in gravity models of migration, single mothers can be pushed and pulled into the labor market by a variety of positive and negative incentives.

(30 May 2019):The Bond Market Is Trying to Tell Us Something (Worry)The New York Times

——–“Let’s face it: Bonds are boring.  Usually, stock markets are the source of hyperventilation and headlines.  But right now, all the action is in the bond market.  It is sending powerful signals that there’s trouble ahead for the United States economy.  They’re powerful enough they’re even rattling the parts of Wall Street that people do talk about.  Does it mean a recession is imminent?  Certainly not.  Part of what makes the bond market so ominous is that it’s not terribly specific.  But there is good information buried in the weeds.”

********The remainder of the article reveals what is “buried in the weeds.”  They include, falling bond yields, yield curve inversions, and dropping inflationary expectations. 

(1 June 2019):The Economics of Rihanna’s SuperstardomThe New York Times

********This piece was written by the late Alan Krueger on  the occasion of the publication of his book Rockonomics: A Backstage Tour of What the Music Industry Can Teach Us about Economics and Life.  Since Krueger passed away on March 16, 2019, this must have been written some time ago, which makes me wonder about the placement of such Opinion pieces more generally.  Here Krueger asks, “Why has the economy become more a winner-take-all affair?”  In answering his question, he points to “scale and uniqueness” as been necessary “to create a superstar market” (one in which winner takes most, if not all).  Two forerunners of the serious analysis of “superstar markets” are Alfred Marshal, Principles of Economics (1890 and later editions) and Sherwin Rosen, “The Economics of Superstars,” a technical piece published in 1981.  So-called “power laws” are important in the study of income distribution for superstar markets.  You can learn a bit about them here

(3 June 2019):Why does California’s public health department treat CBD like poison?The Los Angeles Times

********This article discusses two bills making their way through the California state legislature.  One dealing with cultivation of hemp and the other with the medicinal properties of cannabidiol (CBD).  Cultivation looks promising as hemp uses one-third the water of alfalfa in a water-challenged area.  But CBD is problematic and ironic.  In a state where “psychoactive CBD from marijuana can be legally sold in pot shops” CBD “derived from hemp is currently not allowed in any of the items” regulated by the California Department of Public Health, “including conventional foods, drugs and cosmetics.”

(4 June 2019):The Beginning of the End of the Old World Appellation System?The Wine Economist

********This is a blog post by economist Mike Veseth, who produces The Wine Economist and is professor emeritus of International Political Economy at the University of Puget Sound.  The appellation system, or systems, of which he writes, pertains to the rules for describing the provenance and product of wines most highly developed in Europe.  While discussing the goals of appellation systems—protecting regional producers from fraud and protecting quality standards—he discusses the two forces threatening existing appellation systems: the global market and climate change.  In doing so he provides clear and compelling analysis.  I was especially interested in his discussion of what vintners the world over are doing experimentally to deal with climate change, even in well-established producing regions like Bordeaux.  A nice example of how individual producers are adapting to the market and climate change.

(4 June 2019): [SR]Fast Food Embraces Meatless Burgers, but There Aren’t Enough to Go AroundThe Wall Street Journal

——–“Fast-food restaurants are rushing to add meat-free burgers to their menus, hoping these higher-priced alternatives will help them capture additional traffic and dollars even as suppliers have struggled to fill all the orders.  Imitation meats made by Beyond Meat Inc and Impossible Foods Inc. are on sale at nearly 20,000 restaurants across the U.S., according to those companies. . . . Restaurants’ embrace of vegetarian-friendly fare reflects competition among fast-food chains to attract younger diners who prioritize sustainability and healthfulness.”  But, rapid growth in demand “is straining the ability of Beyond Meat and Impossible Foods to meet it.  Still, investors have signaled that they believe the companies will be able to bring plant-based products to the masses.  Beyond Meat’s shares have nearly quadrupled from its May initial public offering prices, valuing the company at $6 billion.”  These non-meat burgers are not inexpensive.  Beyond Meat’s burger tends to cost double the price of standard ground beef.  Presently delivery is a problem.  Both Beyond Meat and Impossible are finding it impossible to meet the demand for its burgers.

********Closely related to the WSJ article is this informative three-minute video from Yahoo! Finance.  For a look at the Asheville, North Carolina food scene, check out the piece from food writer Mackensy Lunsford, “Impossible to find: Restaurants report vegetarian Impossible Burger shortage.”

May you have a good week!


371 (29 May 2019)

Welcome to week 371!  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. 

This week a book by my son, Will Larson, was published by Stripe Press: An Elegant Puzzle: Systems of Engineering Management.  Will is Head of Foundation Engineering at Stripe, having taken his undergraduate degree in computer science at Centre College, a small private liberal arts college in Danville, Kentucky.  If you are interested in learning a bit about the book and a bit about the author, you may be interested in reading the interview “How to Size and Assess Teams from an Eng Lead at Stripe, Uber and  It contains a thoughtful interview on matters pertaining to team size, working with team members, and how to provide for career opportunities for team members and oneself.

(22 May 2019): [SR]You’ll Need a Lot More Money to Buy That Jar of HoneyThe Wall Street Journal

——–“Global honey prices are at their highest levels in years, due to a new wave of consumer demand for natural sweeteners and declining bee populations that are hampering mass production.”  Although has been used as a sweetener for centuries, it has become popular in recent years “with people looking for healthier alternatives to can sugar and high-fructose corn syrup. . . . In addition, it is being used more as an ingredient in shampoos, moisturizers and other personal-care products that companies market as naturally made.”  Since 2013 the price of honey has climbed about 25%, “while the cost of sugar has fallen around 30% over the same time frame.”  On the supply side, honey production has fallen due to colony collapses, winter losses, and “the conversion of large swaths of land to industrial crop farms” that have “reduced the amount of food—pollen—that is available for bees.”

(22 May 2019):The radical plan to change how Harvard teaches

——–Economics 10 at Harvard University has long been one of the most popular courses on campus.  Much like the proverbial ECON 101 of student lore, it provides the rudiments of how to think like an economist.  Well-known economists Martin Feldstein and Gregory Mankiw have taught the course recently.  Now, however, there is another course introducing students to how to do economics.  It is Economics 1152: Using Big Data to Solve Economic and Social Problems and it is taught by celebrated economist Raj Chetty.  Taking an empirical, rather than theoretical, approach, it provides students with an experience of how to use statistical tools that address important questions that relate to major political questions.  Chetty is “focused on the roots and consequences of economic and racial inequality.” 

********As the article notes, Economics 1152 seems to have succeeded in gathering a more diverse group of students than Economics 10.  But in many ways 1152 seems more challenging.  For many years a frequent point of discussion among economists was whether students should be introduced to microeconomics or macroeconomics first.  The Harvard experience suggests that increasingly the point of discussion among economists will be whether students should be introduced to empirical and theoretical material first. 

(23 May 2019):Trump Wields a More Powerful Weapon Than Tariffs for Trade

——–“President Donald Trump’s trade war against China has so far focused on attacking imports.  His new front: Weaponizing American exports.”  The U.S. is seeking to “expand and toughen the export control regime that for decades has curbed the sale of defense-related technologies to rogue regimes and strategic rivals. . . . In closed-door deliberations the administration since last year has been discussing with companies and industry groups how to update and redefine the products on the Commerce Department’s export control list, a process that is expected to gel in the coming weeks.”  Some businesses fear export controls more than tariffs.  “Companies like General Electric, Google and Microsoft are worried it could bar them from competing in lucrative markets while reducing America’s capacity to innovate.”

********The whole concept of economic warfare is so at variance with the economist’s typical quest to identify situations where opportunities exist for mutually advantageous gain, win-win situations if you will.  Nonetheless, there are those who want to pursue economic warfare.  What are the options?  This is not widely-discussed but here is a paper by two Czech economists that provides a broad overview of negative economic sanctions—see Table 1—during an economic and trade war.  Wikipedia also provides an overview of the topic.  Encyclopedia Britannica provides a description that has more narrative. 

(23 May 2019): When Big Rewards Don’t Pay OffJSTOR Daily

——–“While we’d expect that when it comes to work, the greater the reward, the greater the effort and the better the performance, the truth is more complex.  Scholars Dan Ariely, Uri Gneezy, George Loewenstein, and Nina Mazar . . . examine[d] the effect of reward on performance.  What they found is that . . . Reward people too little, and they have no reason to put in any effort.  Reward them just enough, and you’ll give them the necessary incentive to produce results.  Raise the stakes too high, however, and while their effort might increase, counterintuitively enough, their performance might suffer.”

********The post is quite brief and in a variety of experiments they found that “across the board, performance was markedly worst in the highest reward category.”  The link to the original article—not too technical, although some statistics—at the end of the post.  My takeaway is that if incentives are too large, performance may suffer.

(23 May 2019):The Wealth Detective Who Finds the Hidden Money of the Super RichBloomberg Businessweek

********This piece discusses the work of UC Berkeley economist Gabriel Zucman who is “the world’s foremost expert on where the wealthy hide their money.  His doctoral thesis, advised by [Thomas] Piketty [of Capital in the Twenty-First Century fame], exposed trillions of dollars’ worth of tax evasion by the global rich.”  Zucman teamed with UC Berkeley colleague Emmanuel Saez to write the influential 2016 paper “Wealth Inequality in the United States Since 1918,” which “distilled a century of data to answer one of modern capitalism’s murkiest mysteries: How rich are the rich in the world’s wealthiest nation?”

********Aside from learning about Zucman, who appears on the cover of this week’s Bloomberg Businessweek, the article has much to so about the inequality of wealth in the U.S. and the difficulty of measuring wealth, the latter of which is important as Democratic presidential candidates like Elizabeth Warren are proposing to tax wealth in order to increase tax revenues.  The article includes a five-minute video that provides a nice overview of the work of Zucman and Warren’s proposed wealth tax.  Wealth taxes are not new, “At least 15 European countries have tried them; all but four have repealed them, most recently France.”  I looked for a reliable reference, including country names, on the European wealth tax.  The National Review came closest.

(24 May 2019):Florida Is the Big Winner as the Wealthy Move Out of Northern

——–“Roughly 5 million Americans move from one state to another annually and some states are clearly making out better than others.  Florida and South Carolina enjoyed the top economics gain [with Florida far ahead], while Connecticut, New York and New Jersey faced some of the biggest financial drains according to a Bloomberg analysis of state-to-state moves based on data from the Internal Revenue Service and the U.S. Census Bureau.”

********The Bloomberg analysis looks at the aggregate difference of the income of people leaving a state minus the income of people entering a state to measure financial gain, so this is a bit different from measuring inflows and outflows of people, although the two are related.  The biggest financial loser was New York.  “While long a haven for retirement, Florida’s effort to lure Wall Street executives has gained traction thanks to a provision in the federal tax law passed by the Trump administration that hits residents of high-tax states by putting a lower cap on state and local tax deductions”

May you have a good week!


370 (22 May 2019)

Welcome to week 370!  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.

(13 May 2019):Amazon rolls out machines that pack orders and replace

——–“ Inc is rolling out machines to automate a job held by thousands of its workers: boxing up customer orders.  The company started adding technology to a handful of warehouses in recent years, which scans goods coming down a conveyor belt and envelops them seconds later in boxes custom-built for each item, two people who worked on the project told Reuters.”  Widespread adoption of these machines by Amazon “would amount to more than 1,300 job cuts across 55 U.S. fulfillment centers for standard-sized inventory.  Amazon would expect to recover the costs in over two years, at $1 million per machine plus operational expenses, they said.”

********A clear illustration of how advances in robotics are increasingly putting in jeopardy.  As the article concludes, “This is just a harbinger of automation to come.”  The ultimate goal is a “lights out” warehouse.

(15 May 2019):The pangolin black market is fueled by its scales, not its good looksMarketplace

——–“If you spend time browsing for cute animal photos on the internet, you may have stumbled across the pangolin.  The exotic animal may be adorable, but several species are endangered.  That’s because they are heavily trafficked for their scales.  Last month, the biggest ever seizure of pangolin scales was made in Singapore of 14.2 tons, or an estimated 36,000 pangolins.”  Pangolin are “the most trafficked mammal in the world . . . Pangolin scales are in demand primarily for traditional Chinese medicine.  They’re dried, ground into powder and used to supposedly cure anything from lactation difficulties to arthritis.”

********Here is a case where social and historical factors, i.e., the invisible handshake are driving the demand for pangolin scales (and thus in derived fashion, pangolin).  The word ‘trafficked’ caught my attention, which presumably means that a black (illegal) market is involved.  So what about legal markets?  The global numbers for legally slaughtered animals are quite dramatic, in 2014: 62.0 billion chickens were slaughtered, followed by 1.5 billion pigs, 648.7 million turkeys, 545.1 million sheep, 444.2 million goats, and 300.1 million cattle.  Evidently these animals are marketed but not trafficked.  You can learn more about these numbers here.  Interesting to see the concern for trafficked animals but not for marketed animals.

(15 May 2019):The Finance 202: Trump’s trade war sends big business to K StreetThe Washington Post

********K Street in Washington, D.C. is “known as a center for numerous lobbyists and advocacy groups,” so this article points to the importance of lobbyists during the trade war despite the fact that presently “only one of the top-20 lobbying firms  has a K Street address.”  (The article describes K Street as a metonym, i.e., “a word, name or expression used as a substitute for something else with which it is closely associated.”)  Why is there a rush to K Street?  “By more than doubling the duties on $200 billion worth of Chinese goods and threatening to extend that 25 percent levy to everything imported from the country, the Trump administration has created a new crowd of companies desperate for relief and lining up to hire Washington’s most connected operators to help.  The hope: to convince the U.S. Trade Representative to exclude their product from the new tariffs.  So the relatively impersonal market is, by these tariffs, displaced by relatively personal relationships.  I am reminded of the statement by John Adams, that the Massachusetts Constitution sought to establish “a government of laws and not of men.”  Perhaps the parallel statement is “an economy of markets and not of men”

(18 May 2019):The little-noticed surge across the U.S.-Mexico border: It’s Americans, heading southThe Washington Post

——–“President Trump regularly assails the flow of migrants crossing the Mexican border into the United States.  Less noticed has been the surge of people heading in the opposite direction. . . . If the thousands of Mexicans moving home are taken into account, the flow of migrants from the United States to Mexico is probably larger than the flow of Mexicans to the United States.  The American immigrants are pouring money into local economies, renovating historic homes and changing the dynamics of Mexican classrooms.”  In some cities, “Restaurants have adopted ‘American timing’—serving dinner at the ungodly hour of 6 p.m.”

********An interesting look at the flip side of the coin.  The “American timing” for serving dinner shows that sometimes economic factors can alter cultural factors, i.e., the invisible hand can influence the invisible handshake.

(18 May 2019):In Cities Where It Once Reigned, Heroin Is DisappearingThe New York Times

——–“Heroin’s presence is fading up and down the Eastern Seaboard, from New England mill towns to rural Appalachia, and in parts of the Midwest that were overwhelmed by it a few years back.  It remains prevalent in many Western states, but even New York City, the nation’s biggest distribution hub for the drug, has seen less of it this year.  The diminishing supply should be a victory for public health and law enforcement alike.  Instead, in cities like Baltimore, longtime users who managed to survive decades injecting heroin are now at far higher risk of dying from an overdose.  That is because synthetic fentanyl, a deadlier drug that is much cheaper to produce and distribute than heroin, has all but replaced it. . . . The reason fentanyl is everywhere is economic: Dealers and traffickers can make far more money from it than from heroin.  Instead of waiting months for poppy fields to grow in Mexico and farmers to harvest the brownish-black gum, which then gets refined into powder and shipped north, traffickers here and in Mexico can order fentanyl from China, or precursor chemicals to make it in clandestine labs, generating far more doses with far less labor.”

********Heroin, fentanyl, and opioids, all three show how changes in relative prices have led to significant shifts in drug usage and deaths.  Sam Quinones, of The New York Times, first made the connection between opioids and heroin in his outstanding 2013 book Dreamland: The True Tale of American’s Opiate Epidemic.  Quinones had the opioid story under control in 2013 but it has taken a long for concern to be filtered down from his book to public consciousness and state and federal governing bodies.  As Quinones argues, low-cost and easily available opioids led to heroin use when the opioid prices increased, and the relative price of heroin fell.  Interestingly, the word ‘fentanyl’ does not appear in the Index to Dreamland, so the story has advanced since then.  With the rise of fentanyl, and the increasing relative price of heroin, fentanyl usage has increased, although some of that usage is unintended.  All this sounds a bit too tidy, but it does show economic forces—the invisible hand—at work in the use of opioids, heroin, and fentanyl.

(19 May 2019):Why Some Europeans Get Cheap Beer and Others Don’

——–“There are three obvious reasons beer prices can differ among European countries.  One is that . . . Value-added taxes vary from country to country.  So do excise duties, reflecting a divergence of attitudes toward beer—from permissiveness . . . to considerable harshness . . . But the pretax prices also diverge widely.  Researchers who have studied food price differences attribute them, among other reasons, to consumption habits and wealth levels that diverge from country to country.  The beer price is negatively correlated with a country’s consumption level and positively correlated with per capita income.  Crudely put, in a wealthy country that drinks less beer, a bottle of lager will be more expensive.”

********The occasion for this piece seems to be a ruling by the European Commission to fine Anheuser-Busch InBev 200 million euros for market power abuse.  The fine was reduced when AB InBev cooperated with the investigation.  The description of the case is interesting and appears in the second paragraph of the article.  It shows how in the EU the language chose to relate product information can contribute to higher prices.

May you have a good week!


369 (15 May 2019)

Welcome to week 369!  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. 

(22 April 2019):In ‘Choked,’ Beth Gardiner Looks At The Origins Of The Clean Air

­********This five-minute broadcast is based upon the recently published Choked: Life and Breath in the Age of Air Pollution, by journalist Beth Gardiner.  The book itself is much broader than an exploration of The Clear Air Act, as is made evident by the “Book of the week” review in The Guardian and the review of the book in [SR] Science.  As the article in Science notes: “Ultimately, Choked is ‘a book about choices’: What kind of air do we want to breathe, and what kind of world do we want to live in?  The decision to prioritize clean air is among our most important economic, scientific, and public choices.”  Contributing to the difficulty of these choices is “invisibility,” which is noted in the Guardian review.  “You see one person run over in the street and you’ll never forget it, but thousands dying from the effects of dirty air will never even faze you.”  It was only through “the careful application of statistical techniques that the impact [of dirty air] has become apparent.”

(7 May 2019):The price of plenty: how beef changed AmericaThe Guardian

********This is a Longread about the history of the beef industry, especially in its formative days when railroads and refrigeration revolutionized where and how cattle were “dissembled” into cut meat products.  It is based upon the just-released book Red Meat Republic: A Hoof-to-Table of How Beef Changed America, by Joshua Specht.  Specht notes: “the history of the beef industry reminds us that this method of producing food is a question of politics and political economy, rather than technology and demographics. Alternate possibilities remain hazy, but if we understand this story as one of political economy, we might be able to fulfil Armour & Company’s old credo – “We feed the world”– using a more equitable system.”  It looks like a good example of the invisible forces at work. 

(8 May 2019): [SR] ’Jump-Starting “America’ Review: Investing in the BrainThe Wall Street Journal

——–“Jonathan Gruber and Simon Johnson’s important ‘Jump-Starting America’ argues that public investment in knowledge and research can help put American economic growth back on track.  U.S. public spending on research and development, they point out, has fallen to 0.71% of Gross Domestic Product from more than 2% of GDP in  1964.  The authors estimate that increasing research funding by 0.5% of GDP—‘roughly $100 billion per year’—would add jobs and push the annual growth rate from 2% to 2.14%.”

********You can learn more about the book here.  The reviewer is Edward Glaeser, a professor of economics at Harvard University.

(10 May 2019):Revisiting the Ponzi Scheme in Mitchell Zuckoff’s ‘Ponzi’s Scheme’The New York Times

********This piece calls attention to the 10 April 2005 review of Mitchell Zuckoff’s Ponzi’s Scheme: The True Story of a Financial Legend.  The book is about the man as much as the scheme but provides background on an expression that appears all-to-often in the news, financial and otherwise.  As the 2005 review points out, there is a particular subtlety “in the classic Ponzi scheme: not just anyone can pull one off; doing so requires cleverness, charm and charisma.”  Mitchell Zuckoff’s book makes it clear that Charles Ponzi had these characteristics in abundance.  Ponzi “persuaded 30,000 people, Bostonians and others, many of them Italian immigrants like Ponzi himself, to entrust him with their hard-earned, pre-inflationary dollars.”

(14 May 2019):Consumers are already seeing price hikes from the last round of Trump’s tariffsThe Los Angeles Times

——–“President Trump has repeatedly proclaimed that when it comes to tariffs on Chinese goods, China pays the price.  But it’s U.S. consumers who actually pay, if export and import firms and manufacturers choose to pass along the cost.  And trade groups and economic studies show that U.S. consumers already are seeing higher prices on a range of items—luggage and major appliances such as washing machines, for instance—that were subject to previous tit-for-tat tariffs in the U.S.’ escalating trade battle with China or retaliatory tariffs from other foreign countries.”  So far, the tariffs “appear to have had a modest impact on overall inflation. . . . However, Goldman Sachs analysts said in a report that when they grouped together nine of the CPI product categories affected by the tariffs so far . . . it showed those consumer prices increased ‘much more’ than other core goods prices in the CPI.”

********The article goes on to discuss prices in the following areas: housing, luggage, major appliances, and other industries, including toys.  “The Toy Assn. trade group said it was ‘very concerned’ about discussion Friday that the U.S. could levy tariffs on the remainder of the Chinese goods that enter the U.S. market.  Rebecca Mond, a vice president of federal government affairs for the Association, notes that the impact on toy prices “could happen as soon as this holiday season.”  That struck me as a useful comment, providing a reminder to the seasonal elements of demand for a product and why price increases might not show up meaningfully until a high-demand season. 

(14 May 2019):The Mighty Pea Is Everybody’s New Favorite Plant-Based

——–With more consumers expressing concern about soy-based protein, peas have become “the food industry’s new favorite protein source.”  Peas are the “star ingredient” in the offerings of Beyond Meat, whose IPO made history “when its shares nearly tripled in value on their first day of trading.  The company’s vegan burgers and sausages are leading the fake meat revolution.”  Peas tend to thrive in northern climates and “Canada is expected to become the global production leader and account for 30% of output in 2020.”  For the present, “Companies are racing to secure supplies” but “Supply worries are likely to be short-term if demand continues to grow as projected.”  Peter Golbitz of agriculture consulting firm Agromeris notes: “I’m never too concerned about the supply of agricultural products . . . They [producers] can expand production lines, or more competition enters the space.”

********What seems to be driving the move into peas is simply stated by Peter Golbitz: “The only reason pea protein became popular is because people didn’t want soy protein.”  Peas have their problems, however.  Henry Rowlands, who directs The Detox Project, says “We can hardly find a clean pea protein source anywhere.”  Perhaps there is a market for farmers who grow clean, i.e., herbicide free, peas. 

********I found the article to be clear and interesting, marred only by describing glyphosate as a pesticide!  In fact, glyphosate, made familiar because of the product Roundup, is an herbicide. 

May you have a good week!


368 (8 May 2019)

Welcome to week 368!  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.

(30 April 2019):They Want It to Be Secret: How a Common Blood Test Can Cost $11 or Almost $1,000The New York Times

——– It’s one of the most common tests in medicine, and it is performed millions of times a year around the country.  Should a metabolic blood panel test cost $11 or $952?  Both of these are real, negotiated prices, paid by health insurance companies to laboratories in Jackson, Miss., and El Paso in 2016.”  But, if “you’re a patient seeking a metabolic blood panel, good luck finding out what it will cost.”  In Tampa, Florida, alone, “the most expensive blood test costs 40 times as much as the least expensive one. . . . Outside of health care, a swing of prices as huge as the one for blood tests in Tampa is unheard of.”  Jeanne Pinder, who runs “the consumer-oriented website Clear Health Costs, notes: “When you get into M.R.I.s, ultrasounds an blood tests, they [the prices differences] are crazy . . . The secrecy in pricing all over this marketplace encourages this behavior”

********The article makes abundantly clear the importance of knowledge (and ignorance) in the health-care pricing.  A big part of this is that involves the negotiations that take place between health insurance companies and hospitals.  For example, “In markets where there is a dominant hospital chain, or a powerful hospital that many patients insist on using, insurers tend to face high prices, with less leverage to bargain the hospitals down.”

********Secrecy and intellectual property are also important in professional sports, for example, Major League Baseball.  The article [SR] “A Brain Drain for the Astros” The Wall Street Journal draws attention to the increasingly data-oriented nature of baseball.  Contributing to the success of the Houston Astros were “some radical hires . . . people like Sig Mejdal, who worked previously at Lockheed Martin and NASA, and Mike Fast, a longtime semiconductor engineer.  They helped transform the Astros into a powerhouse, with three playoff appearances in the last four years and a World Series championship in 2017.”  But the success of the Astros has led to hires of crucial personal by other teams: “The rest of the league this winter treated the Astros like their own personal Walmart on Black Friday, storming the aisles in search of anything they could pull off the shelves.”  To help protect the intellectual property that the Astros have built up, the team now “tries to limit how many people in the organization know the full scope of the club’s inner workings.  The Astros put less in writing than they once did and will, when appropriate, divide information among different people.”  A very interesting strategy.  In 1945 Fredrich Hayek wrote in “The Use of Knowledge in Society” about the importance of markets for unifying dispersed information.  Now an organization is taking steps to distribute unified information.  No doubt this is a common practice among organizations that have substantial intellectual property.

(1 May 2019):A Rare Prize for an Economist Looking at the Big

——–The 2019 John Bates Clark medal, “arguably the most exclusive award in the field of economics,” was given to Emi Nakamura of the University of California-Berkeley.  She is “an undisputed star in the field of macroeconomics.”  Nakamura “is one of the leaders in the field of New Keynesian economics.  This school of thought, which has become the dominant paradigm at central banks around the world, holds that recessions happen because companies are unable to adjust their prices in response to events like a financial crisis or a big rise in interest rates.  Without the ability to adjust prices, the theory goes, companies cut their output and lay off workers instead.” 

********The article goes on to note that, although Nakamura is a “leading light” of New Keynesian economics, she “has spent much of her career challenging the idea”  What a refreshing thing to read.  The Clark Medal is awarded by the American Economic Association.  You can read its Prize announcement, which is substantially longer, here.

(2 May 2019):California janitors may get labor law protections in wake of federal court decisionThe Los Angeles Times

——–“In a decision opening yet another front in the battle over how to classify workers, a federal appeals court Thursday ruled that an international franchiser could be forced to treat its California janitors as employees rather than independent contractors.  The U.S 9th Circuit Court of Appeals ruled that the California Supreme Court’s landmark 2018 Dynamex decision, which makes it harder for businesses to classify their workers as independent contractors, applies retroactively to a class-action case again cleaning giant Jan-Pro.”  According to U.S District Jude Frederic Block, Georgia-based Jan-Pro uses “a sophisticated ‘three-tier’ franchising model” in which “ordinary janitors . . . are classified as ‘unit franchisees,’ independent contractors who are not subject to labor laws requiring minimum wages, overtime, disability insurance or other labor law protections.”

********The decision is viewed as have implications for businesses operating in the gig economy.  In the present case, although probably oversimplified, “franchisees” paid Jan-Pro a “franchise fee” to “clean for the company.”

********An article of related interest, largely because it relates to workers on the low end of the wage spectrum, is [SR]For Lower-Paid Workers, the Robot Overlords Have ArrivedThe Wall Street Journal.  The article, written by columnist Greg Ip, notes: “It’s time to stop worrying that robots will take our jobs—and start worrying that they will decide who gets jobs.  Millions of low-paid workers’ lives are increasingly governed by software and algorithms.  This was starkly illustrated by a report last week that tracks the productivity of its employees and regularly fires those who underperform, with little human intervention.”  The report mentioned appears in The Verge.  Such practices, according to Ip, bring to mind those engaged in by Jack Welch at General Electric, better knowns as “rank and yank.”  Nick Bloom, an economist at Stanford University, says that “In banking and management consulting it is standard to exit about 20% of employees a year, even in good times.”

(2 May 2019):Electric Cars and Solar Compete for the Same

********And what parts are they competing for?  Electric transistors—as “EV production has boomed, solar-component companies are being forced to wait nearly a year for the parts.”  Contributing to the problem has been the reluctance of “makers of components . . . to add capacity . . . But with companies placing orders 18 to 24 months in advance, transistor makers are now ramping up output.”

(3 May 2019):Antibiotics Aren’t Profitable Enough for Big Pharma to Make MoreBloomberg Businessweek

——–“Achaogen Inc. spent 15 years racing to develop antibiotics against resistant superbugs.  It targeted one of the most-feared superbugs lurking in intensive care units: carbapenem-resistant Enterobacteriaceae, or CRE, a strain that can kill up to half the people it attaches.  Last June its first drug, Zemdri, which kills CRE bacteria in the test tube, was approved by U.S. regulators.  From a public health perspective, Achaogen is a success.  But as a business, it’s a failure.  Zemdri’s sales in its first six months on the market were less than $1 million.  Achaogen filed for bankruptcy in April.”  As it turns out, “Big drug companies have been exiting antibiotic research for years, prompting the U.S. government and medical charities to step in with research funding.  Now health experts are realizing that research funding doesn’t matter if there’s no market for the drugs when they get approved.”  A part of this overall picture is that “infectious disease doctors, wary of promoting resistance, are reluctant to use new antibiotics until they’re absolutely needed.”  The tendency is to hold the antibiotic “in reserve,” which “doesn’t make for a good business plan” for drug developers.

********Summing all this up, the CEO of Achaogen, Blake Wise, notes: “It’s really frustrating . . . We developed a really important medicine and went through all the things we needed to do to develop a drug, but the market dynamics are such we can’t successfully run the commercial part of the equation.” 

(4 May 2019): [SR]In News Industry, a Stark Divide Between Haves and Have-NotsThe Wall Street Journal

——–“After suffering a historic meltdown a decade ago in the financial crisis, American newspapers began racing to transform into digital businesses, hoping that strategy would save them from the accelerating decline of print.  The results are in: A stark divide has emerged between a handful of national players that have managed to stabilize their businesses and local outlets for which time is running out, according to a Wall Street Journal analysis of circulation, advertising, financial and employment data.  Local papers have suffered sharper declines in circulation than national outlets and greater incursions into their online advertising businesses from tech giants such as Alphabet Inc.’s Google and Facebook Inc.  The data also shows that they are having a much more difficult time converting readers into paying digital customers.”  All this has contributed to “a parade of newspaper closures and large-scale layoffs.  Nearly 1,800 newspapers closed between 2004 and 2018, leaving 200 counties with no newspaper and roughly half the counties in the country with only one, according to a University of North Carolina study.”

********The North Carolina study alluded to, but not named, appears to be “The Expanding News Desert,” by Penelope Muse Abernathy.  You can download the report and explore interactive maps here.  There is a map for the U.S. as a whole, as well as for every state.  The WSJ article makes note of the problems that the decline of local newspapers presents, in particular for democracy.  As the slogan of The Washington Post says: “Democracy Dies in Darkness.”

(6 May 2019):American Students Have Changed Their

********This article compares the top college majors in 1970-71 and 2016-17.  In brief, likely too brief, “Health professions are in, education and the humanities are out.”  What I found especially insightful about the article was its discussion of the changes brought about by “women entering college in large numbers” and then “busting out of the narrow range of majors such as education and English to which they had initially been confined.”  This is a good example of the invisible handshake—social and historical forces—at work.

********This is a good place to mention a locally-generated article by John Boyle of The Asheville Citizen Times: “Good-paying blue collar jobs go unfilled in tight labor market.”  Do the same factors that affect college major choice also affect the decision to go to college or enter a trade?  Something worthy of study.

May you have a good week!