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.

365 (17 April 2019)


Welcome to week 365!  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.

(4 April 2019):How We Uncovered 10,000 Times Lawmakers Introduced Copycat Model Bills—And Why It MattersThe Center for Public Integrity

——–Two years ago “journalists and developers with USA Today and The Arizona Republic set out to . . . Identify among the roughly 100,000 bills introduced in the 50 states each year what’s been copied from drafts pushed by special interests.”  This article outlines the methodology used to identify copycat legislation.

********This article is one of a series of articles with the collective title “Copy, paste, legislate” being run.  A useful broad overview with relatively few words can be found here.  Although business (4,301 bills) and conservative groups (4,012 bills) were the sources of most copycat legislation, liberal groups (1,602 bills) have also participated.  This is a lengthy and important series.  A list of all of the articles can be found in “You elected them to write new laws.  They’re letting corporations do it instead.”  The article is lengthy, but you can identify the list by searching on: “More in this series.”

(9 April 2019):China’s Voracious Appetite for Timber Stokes Fury in Russia and BeyondThe New York Times

——–“From the Altai Mountains to the Pacific Coast, logging is ravaging Russia’s vast forests, leaving behind swathes of scarred earth studded with dying stumps.  The culprit, to many Russians, is clear: China.  Since China began restricting commercial logging in its own natural forests two decades ago, it has increasingly turned to Russia, importing huge amounts of wood in 2017 to satisfy the voracious appetite of its construction companies and furniture manufacturers. . . . Russia has been a witting collaborator, too, selling Chinese companies logging rights at low cost and, critics say, turning a blind eye to logging beyond what is legally allowed.”

********The Altai Mountains roughly form the western boarder of Mongolia.  The article goes on to note that, although the Chinese government “began restricting commercial logging in the nation’s forests” two decades ago, “The country’s demand for wood did not diminish.  Nor did the world’s demand for plywood and furniture, the main wood products that China makes and exports.”  The low price at which Russia sells its logging concessions, averaging “roughly $2 a hectare, or 80 cents an acre, per year” has contributed to the loss of Russian forests.

(11 April 2019): [SR]Congestion Pricing Is Bad News for Parking Garages in New YorkThe Wall Street Journal

——–“With congestion pricing coming to New York City, Manhattan’s public parking garages risk becoming an endangered species in parts of the borough.  Starting in 2021, commuters entering Manhattan below 60th Street could be charged a fee somewhere around $11.52, according to estimates.  That measure is likely to accelerate the disappearance of parking garages from Midtown and downtown, real estate owners and brokers say.  The entry fee marks the latest threat to an industry that is already struggling with declining revenues with the rise of ride-sharing companies like Uber and Lyft.”

********The article goes on to point out that parking garage owners have been struggling in recent years, with many of their properties being converted to alternative uses.  Although parking garage owners in areas subject to congestion pricing are likely to be harmed by the move, “parking garage landlords just outside the congestion pricing zone stand to gain . . . as commuters look to avoid the fee by parking further away from work and either  walking to their Midtown offices or taking the subway.”  (Interestingly, NYC has a very high rate of bus fare avoidance—one of five riders avoid paying the fare.)  All this points out the consequences of line drawing—depending upon which side of the line you happen to be on, the incentives and opportunities can be much different.  And who draws these lines?  Usually regulatory or political entities.  One should remember that all lines, like literal “lines in the sand,” are social constructs, somewhat arbitrary and subject to revision.  A valuable book about distinctions is Eviatar Zerubavel, The Fine Line: Making Distinctions in Everyday Life.

(14 April 2019):Overfishing Doesn’t Just Hurt the FishBloomberg.com

——–[This is an Opinion from the Editorial Board.]  “Overfishing threatens disaster not only for fish, oceans and the food supply, but for fishing itself.  The industry’s prosperity declines right along with populations of tuna, shark, swordfish and other species.  Yet all over the world it persists in taking more fish than nature can replace.  If this practice seems foolish, still more so are government efforts to encourage it.  The largest fishing nations spend tens of billions of dollars annually to help fishing companies pay for fuel and new vessels.  The U.S. government has been a leader of international efforts to end subsidies, but is now proposing a new one of its own: low-interest loans for fishing-boat construction.  The National Marine Fisheries Service should abandon this disturbing reversal of policy.”

********This Opinion largely endorses the argument made by Martin D. Smith in “Subsidies, efficiency, and fairness in fisheries policyScience.  Encouraging the expansion of fishing capacity is certainly not the way to address overfishing concerns.  The Proposed Rule is not yet in place.  You can learn more about it in The Federal Register.

(14 April 2019):Paying taxes in the hustle economyThe Los Angeles Times

********This is not so much about paying taxes as it is about the so-called “hustle economy” or the more familiar “gig economy.”  The essential point of the article is that federal statistical agencies, notably the Bureau of Labor Statistics, have failed to keep pace in data-gathering about contingent workers despite its growth.  In fact, last year the BLS released “its first Contingent Worker Survey in 13 years.”  The article goes on to note: “It’s alarming what crucial information about hustle industries is lacking” and goes on to list that missing information. 

********A recent book on the subject is Hustle and Gig: Struggling and Surviving in the Sharing Economy, by Alexandrea J. Ravenelle.  In the book, Ravenelle “shares the personal stories of nearly eighty predominantly millennial workers from Airbnb, Uber, TaskRabbit, and Kitchensurfing.”  Higher education, of course, is a significant and growing part of the “hustle economy.”  In terms of teaching, adjunct professors are large-scale contributors to the education of many students, especially at lower levels.  (Disclosure: I taught two courses as an adjunct this year and was grateful for the opportunity.)  There is a new book out by Herb Childress, The Adjunct Underclass: How America’s Colleges Betrayed Their Faculty, Their Students, and Their Mission, that explores the roughly 70 percent of professors who are part time.  You can read a bit about the book, as well as an interview with the author, at Inside Higher Ed.  Although the book is “Part memoir, part manifesto, it’s also a rigorous, data-driven analysis of how we got here, why adjunctification hurts the academic enterprise and possible solutions.  There’s a full appendix of charts, facts and figures.  The mix makes for a book that anyone, novice to expert, can read.”

May you have a good week!

Bruce

364 (10 April 2019)


Welcome to week 364!  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 completes the seventh year of TIF Weekly, which first appeared on 27 April 2011 and took a one-year sabbatical after year six.  I’d like to express my thanks to you for making the time to consider what I find and my thoughts about them.

(7 March 2019):Brand Reputations That Took a Hit in 2019Statista

********Statista “offers daily infographic about trending topics covering Media and Society.”  This brief piece focuses on the Humpty Dumpties of the world of brands, with Facebook and Tesla Motors taking the biggest tumbles, followed by McDonald’s.  Based upon the Axios and Harris Poll The 100 Most Visible Companies, a look at the Poll will also show that the companies that improved their reputations the most during the year were Samsung, Sony, and 21st Century Fox.  The Poll makes for an interesting browse.

********Brand reputation is very much “in the news” in Asheville, North Carolina.  The naming rights for what was once known as The Asheville Civic Center and is now known as The U.S. Cellular Center are up for consideration.  The highest bidder for those rights was Harrah’s Cherokee Casino, which is owned by the Eastern Band of the Cherokee Indians; it bid $3.25 million for five years in contrast to a $543,000 bid for three years by U.S. Cellular.  But, as the article notes, many in the local community would be offended by the association of gambling with the city.  Then there is the issue of branding.  Stephanie Brown, the CEO of Asheville tourism development group Explore Asheville, recently remarked that “the casino’s gaming brand is ‘inconsistent with our community identity.’”  She goes on to note: “(Harrah’s is) buying affiliation with our community identity and our destination brand . . . But that connection is a two way street that ties Asheville to their national corporate gaming identity—and those characteristics are not positive for any of Asheville’s goals—not as a place to live, go to college, to visit or to locate a business.” 

********Strictly from a dollar-and-cents standpoint, there is an interesting question here: “Will the short-term benefit of additional funds from Harrah’s compensate for the long-term cost of (alleged) injury to the Asheville brand?”  Related to that is the issue of whether there might be some long-term benefits, too, speaking strictly in money terms.  This is an involved issue.  Unsurprisingly, brand valuation is a business, as Wikipedia makes clear.  Three leading firms are: Interbrand, Kantar Millward Brown, and Brand Finance.  Although brand valuation is typically (and more easily) associated with businesses, it can and has been done for cities.  Here is one example from the Guardian, which briefly discusses some aspects of the methodology used by the consulting firm Saffron which generated the valuations.  The point of all this is simply to indicate that professional guidance is available for cities that want help in thinking systematically about their brands.

(2 April 2019):NC was once a top source of lithium.  Growing demand could lead to a mine near Charlotte.The Charlotte Observer

——–“A region west of Charlotte that was once a mother lode of lithium, the increasingly vital metal that powers cellphones, Teslas and cordless tools, may soon be one again.  A recently-formed company, Piedmont Lithium Limited, is applying for permits to launch an open-pit lithium mining operation that it says would be the only one of its type in the United States.  Piedmont plans to extract lithium from mineral deposits in Gaston County, 25 miles west of Charlotte, in what geologists call the Carolina Tin-Spodumene Belt.  Mines in the belt supplied most of the world’s lithium from the 1950s through the 1980s, before producers turned to cheaper deposits in South America and Australia.”  Piedmont Lithium believes that there is enough lithium at the site to be mined for 13 years.  It also says that North Carolina is attractive “because of its low labor costs, corporate tax rate and lack of state mining royalties.”  The mine would be open pit, like a quarry, and “as much as 500 feet deep.

********This article appeared later—April 9th—in The News and Observer.  Both The Charlotte Observer and The News and Observer are owned by The McClatchy Company.

(3 April 2019):Short of Workers, U.S. Builders and Farmers Crave More ImmigrantsThe New York Times

——–Builders are facing “a demographic reality that could hamstring industries besides their own: Their labor force is shrinking.  President Trump’s threat to close the Mexican border, a move that would cause damage to both economies, only adds to the pressure.  Immigration—often illegal—has long acted as a supply line for low-skilled workers.  Even before Mr. Trump ratcheted up border enforcement, economic growth in Mexico and the aging of the country’s population were reducing the flow of Mexican workers into the United States.”  According to the Pew Research Center, “Immigration has been padding the labor force for years.  Over the last two decades, immigrants and their children accounted for more than half the growth of the population of 25- to 64-year-olds . . . Over the next 20 years, they will have to plug the hole left by the retirement of the baby boom generation.”  The Trump administration “has tried to shift immigration policy to limit the entry of less-educated immigrants and draw more workers with advanced degrees, businesses are still hungry for immigrants with lesser skills.”  In the hotel and lodging industry” immigrants make up almost one-third of the workers . . . and over a fifth of workers in the food service industry.”

********As the article notes, “Businesses scrambling for low-skilled workers provide a glimpse into the kind of strains a future of low immigration might bring.”  A case in point is “agriculture, where seven in 10 workers were born in Mexico, and only one in four was born in the United States.”  As a result of the increased difficulty in securing workers, some California growers are relocating their operations to Mexico.

(5 April 2019):This 99-year-old federal law is stifling jobs and shifting higher costs to consumersThe Washington Post

********This piece expresses the opinion of columnist George F. Will.  Its subject is the Merchant Marine Act of 1920, otherwise known as The Jones Act, which provides that “cargo transported by water between U.S. ports must travel in ships that are U.S.-built, U.S.-owned, U.S.-registered and U.S.-crewed.”  Will argues, drawing up a lengthy and well-documented article by the Cato Institute, that “The Jones Act illustrates how protectionism creates dependent industries that then squander resources (ingenuity, money) on manipulating the government.  The act also illustrates the asymmetry that explains much of what government does—the law of dispersed costs and concentrated benefits.  The act’s likely annual costs to the economy (tens of billions) are too widely distributed to be much noticed; its benefits enrich a relative few, who use their ill-gotten profits to finance the defense of the government’s favoritism.”  Utah Senator Mike Lee has introduced a bill called The Open America’s Water Act of 2019 to repeal “the Jones Act’s requirements that cargo transported by water between U.S. ports must travel in ships that are U.S.-built.”  Such laws making shipping goods to and from Alaska, Hawaii, Guam, and Puerto Rico especially expensive.

(6 April 2019): [SR]The Battle for the Last Unconquered Screen—The One in Your CarThe Wall Street Journal

——–“The auto industry and Silicon Valley are locked in a battle for control of one of the last unconquered screens: your car dashboard display.  At stake are billions of dollars in revenue from ads and services as well as the balance of power between two big industries.  And then there is the future of the dash itself, a source of endless complaints from drivers frustrated by its glitchy concoction of buttons and technologies.  Car makers, trying to overcome this poor track record, are counting on these few square inches to help build closer relationships with customers.  Some fear handing control to Silicon Valley.  Alphabet Inc. and Apple Inc., meanwhile, are itching to put their familiar screens and apps inside vehicles.”

********The article goes on to note that data-driven products making use of the screen and knowledge about driver behavior “could create as much as $750 billion in new revenue by 2030.”  Ky Tang, an executive director of Silicon Valley’s Telenav Inc., notes: “We see this as the battle for the fourth screen,” following television, computer and mobile phone.  In 2011, the four screens included tablets, so maybe this is the fifth screen?  Whatever the number, the screen on one’s auto dashboard will be a much-disputed terrain.

(6 April 2019):The black-white wealth gap is unchanged after half a centuryThe Economist

——–”American history is replete with horrific episodes that prevented the accumulation of black wealth for centuries: first slavery, then indentured servitude under Jim, Crow, segregated housing and schooling, seizure of property and racial discrimination.  The result was that in 1962, two years before the passage of landmark civil-rights legislation and the Great Society programme, the average wealth of white households was seven times greater that that of black households.  Yet after decades of declining discrimination and the construction of a modern welfare state, that ratio remains the same.”  The multiple for median wealth is even larger: “The typical black family has just $17,100 compared with the typical white one, which has $171,000.”

********The article goes on to point out that “Determining what lies behind the persistent wealth gap is essential to fixing it.  The thinking ascendant on the left blames both present-day discrimination and the long history of racist public policies, such as redlining, an official practice that made it harder for blacks to get mortgages, and so permanently disrupted the transmission of wealth between generations.”  One cure for all of that is reparations.  But reparations given as a lump-sum, as put forward in “baby bond” proposals, “would not lead to wealth convergence if present-day racial income patterns remained fixed.”  Furthermore, “the politics of reparations remain treacherous.  Even race-neutral anti-poverty programmes, like cash welfare and food stamps, already attract fierce opposition, in no small part because they are often seen by white voters as handouts to minorities and immigrants.”

(6 April 2019):MIB: Michael LewisThe Big Picture

********This episode of Masters in Business, with Barry Ritholtz, features best-selling author Michael Lewis, whose most recent book is The Fifth Risk.  In an engaging and spirited interview of one hour and thirty-five minutes, Lewis speaks about his time at Salomon Brothers, his developing love for writing, and the path he took through his sequence of highly-successful books.  Definitely worth a listen—it made me want to read through all of his books.  You can find them at his official website, which draws attention to his latest project—the podcast “Against the Rules.”

(9 April 2019):Immigrants In The U.S. Send Billions of Dollars HomeStatista

********This graphic shows how much in aggregate immigrants in the U.S. send to their home countries.  Countries receiving the most funds are Mexico, then China, then India.  The information is based upon work done by Pew Research, which you can view here.  The interactive features of the link allow one to select outgoing or incoming remittances.  For example, the countries that UK immigrants send the most funds to are Nigeria, India, France, and Pakistan.

(10 April 2019):Google Flips the Switch on Its Next Big Money MakerBloomberg.com

——–The next big money maker is Google Maps. “an indispensable part of life for more than a billion people . . . The service has been mostly free, and free from ads, since it launched 14 years ago.  Interviews with Google executives and customers show this is changing as the internet giant increases the ways advertisers can reach Maps users . . . The app now regularly highlights sponsored locations, and shows extra paid listings when people look for nearby gas stations, coffee shops or other businesses.”  Brian Nowak, a Morgan Stanley analyst, notes: “Sometimes I say the most under-monetized asset that I cover is Google Maps . . . It’s almost like a utility where it’s kind of waiting for you to flip the switch on.”  Apparently, the switch is being flipped.

********A glimpse of the way one analyst and Google thinks.  What asset is likely to be monetized next?

May you have a good week!

Bruce

363 (3 April 2019)

Welcome to week 363!  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.

(26 March 2019):Infected U.S. Shale Oil Is Being Turned Away by Asian BuyersBloomberg.com

********U.S. shale oil is not “infected” in the biological sense, but it is frequently degraded by the presence of impurities, such as “oxygenates, metals and cleaning agents”—picked up in production and transportation by pipeline.  “Two refiners in South Korea . . . have rejected cargoes in recent months due to contamination that makes processing difficult.”  In at least one case, oil refused by South Korea was redirected to China.

(27 March 2019):U.S. and China got into a trade war—and Mexico walked away richerThe Los Angeles Times

——–“The Trump administration’s trade war with China has turned out to be a windfall for another country the president frequently berates Mexico. . . . Mexico has seen gains in shipments to the U.S. in categories in which competing Chinese goods were hit with tariffs, including poster board and air conditioner parts.  In all, U.S. imports of goods from Mexico surged 10% to almost $350 billion last year, the fastest growth in seven years.  That helped widen the U.S. trade deficit with Mexico by 15% to more than $80 billion, while the growth in shipments from China slowed by about a third.”  Mexico’s bonanza “underscores the difficulty in trying to win a trade war when companies can shift production or find new sources to avoid tariffs.  Despite Trump’s vow to reduce it, the U.S. trade deficit for goods globally hit a record $891 billion last year as tax cuts boosted demand for imports and retaliatory tariffs weighed on American exports.”

********A nice illustration of what is likely to occur when a bilateral approach is taken to a “problem” that is multilateral. 

(1 April 2019):The Creeping Capitalist Takeover of Higher EducationHuffPost Highline

********Unfortunately, this is not an April Fools joke.  Written by long-time higher ed reporter Kevin Carey, this lengthy article explores the interaction of for-profit education, online education, traditional and mostly elite universities, accrediting agencies, and the federal government.  The result is a concerning mix of degrees that benefit universities a little and online program managers (OPMs) a lot; students may benefit a little.  A key factor creating immense profit opportunities has been a pricing decision, i.e., charging students the same tuition for an online coursework as for campus-based coursework.  The costs are nowhere near the same, so that opens up a large gap between marginal revenue and marginal cost of a course which OPMs have been eager and able to fill.  A sobering article.

********Kevin Carey is the author of the 2015 book The End of College: Creating the Future of Learning and the University of Everywhere, which no doubt touches on some of the themes developed in the article.  You can read a 10-page review of the book here.  Here is its first paragraph:

While other books have outlined the crises that face institutions of higher education in America (Blumenstyk, 2015; Selingo, 2013), Carey (2015) argues that these crises have been, in part, caused by and can, in part, be solved by burgeoning enterprises in instructional technology. In The End of College, Carey fervently argues that soon, the “University of Everywhere” will arise. This university will be digital, it will serve millions, and, most importantly, in relation to teaching and learning, it will be more effective than traditional universities could ever hope to be.

Looking at this paragraph and the article, it strikes me that Carey has become disillusioned by the prospect of reconstructing higher education to the benefit of students.

(3 April 2019):What Happens When an Economist Walks Into a Brothel?Bloomberg Businessweek

——–“To learn how to manage risks in your life, don’t consult office-bound economists or actuaries.  Aske the real experts: prostitutes, gamblers, magicians, paparazzi, big-wave surfers, movie producers, horse breeders, and soldiers.  Their careers require them to take risks.  They succeed by doing so smartly—deriving as much benefit as possible per unit of risk taken.  Allison Schrager, herself an economist, though not of the office-bound variety, interviewed all of these exotic professionals for an intriguing new book.”

********The intriguing new book is An Economist Walks Into a Brothel: And Other Unexpected Places to Understand Risk.  I took a look at the Table of Contents and it seems to be meaningfully more than yet another book on “let’s look at X as an economist to see what we can say” effort.  It does have some things to say about traditional topics such as insurance and moral hazard.  Along the way Schrager discerns five rules relating to risk management.  This is a very appreciative review and I’m willing to take chance on the book.

May you have a good week!

Bruce

362 (27 March 2019)


Welcome to week 362!  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 February 2019):Rethinking Comparable CompaniesMorningstar

********Real estate agents and their customers know the importance of “comparables” in pricing houses.  Likewise, the notion of peer groups is important in firm comparisons for investment and financial management.  (When I taught managerial finance, peer groups were identified by referring to two conventional factors—product and size—and two additional factors—place and strategy.)  So this article by investment research company Morningstar caught my attention.  (I learned off it from Bloomberg’s Barry Ritholtz.)  In brief, the article presents “A new approach to identifying comparable companies.”  The approach employs artificial intelligence to automatically generate “a full list of comparable companies, even if a firm’s competitors aren’t all in the same sector or industry.”  In effect, Morningstar’s method generates a set of peers that is not tightly wedded to product.  This is especially useful when a firm produces a wide variety of products (as most do).  The method results in a colorful plot that suggests its potential usefulness.

********The article uses Tesla as an example of how the approach works.  Although it is commonly thought of as a car company, it is more than that—it also sells batteries and is involved in solar energy.  To me the usefulness of the Morningstar approach is not so much to determine a set of actual competitors, but rather a set of potential competitors.  Potential competitors are those companies, more generally organizations, that one might be in competition with.  This could work in two ways: (1) to identify potential threats from other competitors— and (2) to identify potential opportunities by competing with companies in other lines of business.

(20 March 2019):How to value a life, statistically speakingMarketplace

——–“When we talk about the value of a human life, we normally say it’s priceless.  Because it is.  But at the same time, economists do put a dollar sign on life in a way.  And so does the government.  In fact, that’s how many regulations are evaluated—weighing the cost to businesses with the benefit in lives.  That is how the U.S. government came to do so.”

********This is a five-minute podcast that takes a historical look at “how we came to put a price on human life.”  Rand Corporation is part of the story, as is the background of the serious consideration of how to deliver an atomic bomb to the Soviets.  An approach was developed that would result in the death of many pilots, which the “Air Force hated.”  As a result, monetary valuation of human lives began.  It now plays a central role in regulatory assessment.  Vanderbilt economist Kip Viscusi played a central role in the formulation and current use of “value of statistical life,” which is used by regulators, who know it more simply as VSL  He is interviewed in the podcast.

(21 March 2019):Why Should Americans Be Grateful for $137 Insulin?  Germans Get It for $55The New York Times

********This article takes a look at Eli Lilly’s Insulin drug, Humalog, and its marketing of an authorized generic, which it sells for about half the price.  Evidently an authorized generic is one produced by the drug maker (Humalog) itself.  This is in contrast to the traditional understanding that “Generics . . . are copies of brand name drugs made by competing manufacturers once the original patent protection has expired.”  My understanding is that Humalog and its authorized generic are chemically identical—only the trademark is different.  Eli Lilly is not alone in this practice, which is worthy of reflection.

********The subject of pricing also appears in “Low-cost veterinarian clinic in West Asheville raises questions on price transparencyThe Asheville Citizen Times (25 March 2019).  The clinic, Open Door, “opened to great fanfare in early 2019.  As promised, its lower prices have made veterinary care accessible to pets that would otherwise have to do without.  But Open Door’s pricing has also disrupted the vet industry in Asheville—and left pet parents wondering why their vet is so much more expensive.”  The article goes on to point out the price transparency among veterinarians is hard to find.

(21 March 2019):Why Companies Swallow Poison PillsJSTOR Daily

——–The term ‘poison pill’ “generically refers to various defensive measures adopted by boards of directors in response to takeover attempts that can cause sever economic repercussions in an acquirer or potential controlling person.”  Such pills “became popular after 1985, when the Delaware Supreme Court ruled in their favor in Moran vs Household International Inc.  After that ruling, companies quickly began adopting them at an extremely high rate.”

********Generally speaking, poison pills aim to make a takeover less attractive.  The post is based upon the article “Poison Pill Defensive Measures,” which was published in The Business Lawyer in 1987.  The article is available at a link at the end of the post.  If you are interested in a concise and readable exposition of poison pills, this is the place to go.

(21 March 2019):A Beginner’s Guide to MMTBloomberg Businessweek

********Here is another look at Modern Monetary Theory.  It is a nice companion to other posts in previous weeks and introduces a few new elements.  The most noteworthy, perhaps, is the information that a textbook has been published—February 2019—on the theory: Macroeconomics, by William Mitchell, Randall Wray, and Martin Watts.  Perhaps a systematic exposition of about 600 pages is enough to shed more consistent light on the theory for those who are not well informed.

(26 March 2019):Is Gig Work a Job?  Uber and Others Are Maneuvering to Shape the Answer” The New York Times

——–In December a Texas regulator held that “Companies that use a ‘digital network’ to dispatch workers the way Uber does could label them contractors rather than employees.  The proposal . . . was a turning point in a campaign that has played out in legislatures and courts in numerous states, and even in Washington, as Uber and other gig-economy companies have risen to prominence in recent years.  Lobbyists involved in this state-by-state effort have worked behind the scenes to provide rule makers with a template.  Hanging in the balance could be billions of dollars in costs, and even fundamental business models, as more gig companies move toward public stock offerings.”

********As the article notes, “Industry officials estimate that a work force of employees costs companies 20 to 30 percent more than a work force of contractors—a sum worth many hundreds of millions of dollars per year to Uber.”  Clearly, the classification of workers could easily make the difference between operating profitably or at a loss, and greatly affect company valuation.  What I found especially interesting about this article was its discussion of the strategy being followed by companies that stand to benefit from having workers classified as contractors rather than employees.  Essentially, companies have found the legislative route to be too difficult to navigate, so they are taking a regulatory route.  Working with regulators rather than legislators may well be easier and quicker.  Bradley Tusk, CEO of Tusk Holdings, has been especially effective in pursuing “the strategy of working through regulators.”  Evidently, The Fixer: My Adventures Savings Startups from Death by Politics, foreshadows Tusk’s approach. 

May you have a good week!

Bruce

361 (20 March 2019)

Welcome to week 361!  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 March 2019):Amazon gets an edge with its secret squad of PhD economistsCNN.com

——–“Estimating inflation is a tricky and complex task.  In the United States, the government’s Bureau of Labor Statistics sends testers to stores to record the price of everything from chees to ties, and surveys consumers over the phone about what they spend on gas and funeral services.  Amazon thinks it could do it better.  With help from outside researchers, the company’s economists are working on a way to measure inflation using thousands of transactions across its own platform. . . . That’s just one way Amazon is using the squad of economists it has recruited in recent years.  The company has turned so many businesses, from retailing to cloud computing, inside out.  Now Amazon is upending the traditional role of economists within companies, as well as the field of economics.”  In recent years, “Amazon has hired more than 150 PhD economists, making it probably the largest employer in the field behind institutions like the Federal Reserve, which has hundreds of economists on staff.”

********The changing role of the economist in private business is one of the key points of this article, a role change that is especially clear in the context of Amazon but applies more generally to tech companies.  One of the factors attracting economists to companies—aside from money—is the ability to work with extraordinarily large data sets.  One of the factors that are concerning is that most of the research that they perform will not see the light of day; economists are often required to sign non-disclosure agreements, somewhat equivalent to research performed for the CIA classified Secret.  Historian of economics Beatrice Cherrier expands upon the significance of the rise of private data: “Before, economists used to work on public data . . . And now, if they want to study behavior, the tech companies have it, and it’s proprietary.”

(14 March 2019): “One Way to Make Reparations Work: Address the black-white wealth gap” Bloomberg.com——–[A column by Bloomberg writer Noah Smith, who previously was an assistant professor of finance at Stony Brook University.]  “The issue of reparations for African Americans, is, of course, full of moral and historical issues that one column, even by someone with much greater understanding and deeper knowledge than me, could ever resolve.  But since the proposal is now being taken seriously, it’s worth thinking about the economics of how it could and should work.”  This is a valuable article that suggests the power of the market to influence a discipline.

********I am going to let the words of Noah Smith speak for themselves.  Please read the article to get a sense of some of the issues.  Among familiar figures noted are Ta-Nehisi Coates, Democratic presidential candidates Julian Castro, Kamala Harris, and Elizabeth Warren, and conservative columnist David Brooks of The New York Times.  Smith raises an essential question: “what the goal of reparations would actually be.”  He goes on to state that “One obvious target is to reduce the persistent black-white wealth gap.”  Such a focus allows him to bring economic thinking into the picture, however successfully you will have to judge for yourself.  To get a glimpse of some of the complexity that exists without that focus, a look at the column of David Brooks is important.  As he sees it, “I don’t think one can grasp the full amplitude of racial injustice without invoking the darkest impulses of human nature.”

********One approach to reduce the wealth divide is the use of “baby bonds,” a policy advance “by economists William Darity and Darrick Hamilton.  If done as a form of reparations, the program would simply endow every black child with a government trust fund, worth perhaps $21,000 to $47,000.  The proposal would have to be modified to give some money to the parents, grandparents and other family members of the recipients, but that’s the basic idea.”  But there are many additional issues raised by Smith that make this proposal fraught with difficulties.  What a fascinating, challenging, and important course would “The Economics of Reparations” be.  So much could follow from it.

(14 March 2019):How Big Tobacco Hooked Children on Sugary DrinksThe New York Times

——–What do “ads featuring Joe Camel, Kool-Aid Man and the maniacal mascot for Hawaiian Punch have in common?  All three were created by Big Tobacco in the decades when cigarette makers, seeking to diversify their holdings, acquired some of America’s iconic beverage brands.  They used their expertise in artificial flavor, coloring and marketing to heighten the products’ appeal to children.  That tobacco companies sold sugar-sweetened drinks like Tang, Capri un and Kool-Aid is not exactly news.  But researchers combing through a vast archive of cigarette company documents at the University of California, San Francisco stumbled on something revealing: Internal correspondence showed how tobacco executives, barred from targeting children for cigarette sales, focused their marketing prowess on young people to sugary beverages in ways that had not been done before. . . . Using child-tested flavors, cartoon characters, branded toys and millions of dollars in advertising, the companies cultivated loyalty to sugar-lade products that health experts said had greatly contributed to the nation’s obesity crisis.”

********This article draws heavily upon “Tobacco industry involvement in children’s sugary market” published in The BMJ.  It is all too easy to understand that a company prohibited from using its intellectual skills and know how in one area will look for other areas to use them.  A forthcoming book—May 2019—may be of related interest.  Its title is The Age of Addiction: How Bad Habits Became Big Business.  Written by David T. Courtwright, “a leading expert on addiction,” the book is a “singularly authoritative history of how sophisticated global businesses have targeted the human brain’s reward centers, driving us to addictions ranging from oxycodone to Big Macs to Assassin’s Creed to Snapchat—with alarming consequences.”  I ran across this book in a very short book excerpt of The Atlantic.

(15 March 2019): [SR]How Sears Lost the American ShopperThe Wall Street Journal

********This article provides a broad overview of events and circumstances that resulted in the fall of Sears from its hay day in the 1970s to its current state.  It is not a pretty story, but it is an interesting one.  Here is the story, “told by eight people who lived it (edited from interviews).  Mr. Lampert, who is poised to steer a vastly shrunken Sears out of bankruptcy, declined to be interviewed.” 

(18 March 2019):In the age of the selfie, a younger market for cosmetic proceduresMarketplace

********The title pretty much says it all, driven by image-sensitive social media, younger people are making use of cosmetic procedures once primarily used by more mature customers.  In particular, the number of Botox injections “administered to 18 to 37-year-olds have increased more than 20 percent in the past five years. . . . Carrie Strom, Allergan’s vice president for medical aesthetics, described Botox as ‘the gateway to all aesthetics’.”  As a result, “Allergan is tripling its marketing budget to $150 and paying social media influencers to promote the products.”

(18 March 2019):Alan Krueger Led a Quiet Economics RevolutionBloomberg.com

——–Princeton University economist Alan Krueger “died over the weekend at the age of 58.  In his outstanding but too-brief career, Krueger helped turn the economics profession into a more empirical, more scientific enterprise.  His research shed light on many of the most important policy issues facing the U.S., and he put that knowledge to good use working for two presidential administrations.”  Krueger’s respect for evidence made him “an important voice in an economics profession in the midst of rapid change.  In recent decades, the theory-heavy economics of the 1970s and 1980s has given way to more empirical approaches.  The most important change has been what economists Joshua Angrist and Jörn-Steffen Pischke call the ‘credibility revolution’—using carefully designed studies to isolate cause from effect, instead of simply looking at correlations or relying on a theoretical model that might be wrong.”  Indeed, Krueger was “a key figure in this revolution, helping to pioneer the use of natural experiments.”

********The survey article in which Krueger is one of the prominent figures is the 2010 article “The Credibility Revolution in Empirical Economics: How Better Research Design Is Taking the Con out of Econometrics.”  You can download a copy of the article, aimed at a more general audience, here.  Many articles have been appearing upon the death of Alan Krueger.  The article in The New York Times provides additional information, as well as the cause of his death.  RIP Alan Krueger.

********The Times article showed a graph summarizing recent use of natural experiments and quasi-experiments, laboratory experiments, and randomized controlled trials in National Bureau of Economic Research publications on public economics.  That graph came from a series of 42 slides by Henrik Jacobsen Kleven on “Language Trends in Public Economics.”  It seems like a useful of Themes, Methods, and Specific Terms being employed in economics.

May you have a good week!

Bruce

360 (13 March 2019)


Welcome to week 360!  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 March 2019):Here’s Where to Find the World’s Super Rich, From Paris to TokyoBloomberg.com

********Articles about the super rich don’t draw me in but maps and graphs about them do.  This piece show’s the world’s top 10 cities and the number of their inhabitants with wealth of at least $30 million.  London has the largest number (4,944), followed by Tokyo (3,732), Singapore (3,598), and New York City (3,378).  The data behind the map comes from The Wealth Report for 2019 from Knight Frank, see page 87 of the report for city-level data.

(9 March 2019):Money to Launder?  Here’s How Hint: Find a BankBloomberg.com

********Money laundering, i.e., making ill-gotten money look good, can be done in many ways.  This Quicktake takes a tour through some of the most commonly used methods: shell companies, countries with poor regulatory oversight, seemingly legitimate trade, mirror trades, mixing clean and dirty money, and (my favorite) “smurfing.”  The website of Global Financial Integrity, an organization that “works to curtail illicit financial flows by producing groundbreaking research, promoting pragmatic policy solutions, and advising governments” seems like a good place to learn more.

(11 March 2019):Women Made Butter a BehemothJSTOR Daily

——–“Do you put butter on your toast?  If so, you likely use a product that’s as mass-produced as they come: the final product of a long chain from cow to kitchen.  But between 1750 and 1850, butter was produced in small batches by farm women in the American colonies and early United States.”  Jensen’s story begins with buttermaking in rural Pennsylvania in the late eighteenth century, where there were few cows and women “began to make and sell butter, in addition to what they already produced for their families.”  At that time “Women used the revenue from butter sales to buy household goods . . . while men used the revenue from selling grain and animals to buy farm equipment and more land.”  But changing economic conditions and soil depletion increased the importance of butter relative to grain.  “Soon, men were seeing the value of butter and began investing in more dairy cattle, especially on land that wasn’t good for growing grain.”  Ultimately, “men took over dairying entirely, denigrating women-made butter as ‘unscientific’ and of lower quality—but not before women made the entire industry possible.”

********The post is brief and clearly shows how once buttermaking became a central activity of the dairy farm, the role of women in its production was diminished.  This seems like the work of the invisible handshake.  You can download the 18-page article at a link at the end of the post.  Of related interest is “When Margarine Was ContrabandJSTOR Daily.

(11 March 2019): [SR]’Extension Cord’ to Carry Green Power From Midwest to EastThe Wall Street Journal

——–“Two European firms are backing an ambitious $2.5 billion project to carry renewable electricity underground through the American heartland.”  The 349-mile electrical transmission line . . . would carry wind and solar energy from Iowa into the Chicago area . . . The link would allow renewable energy from the Upper Midwest to travel all the way into the eastern U.S. by hooking up to the PJM Interconnection, the power grid that serves all or part of 13 states, including Illinois, Ohio and Pennsylvania.”  Called the SOO Green Renewable Rail the “vast majority of the line will run in a Canadian Pacific railroad corridor.  The project’s developers expect that going underground on an existing railroad right of way will make it easier to obtain permits and local permission.”  Although investors “have tried to build more than a half-dozen long-distance, direct-current power line

[like the one the SOO project will be using]

in the U.S.  So far, the aboveground efforts have been delayed or derailed by permitting delays as well as local and political opposition.”  It is expected that building belowground will be “nearly twice as expensive per mile as an aboveground line on towers” but there will be fewer risks of power interruption from tornados and other weather-related events.

********The article goes on to note that developers hope “to take advantage of electricity price arbitrage, as well as abundant renewable energy in the Upper Midwest and Great Plains.”  I.e., moving electricity from regions with relatively low prices to those with relatively high prices.  Very reminiscent, this, to the movement of crude oil in recent history.  I’m especially impressed by the strategy of going underground and using existing rail corridors.

********Another aspect of energy greening involves lightbulbs, as made clear by “America’s Light Bulb Revolution” The New York Times.  In 2010, 68% of bulbs installed in homes were traditional incandescent bulbs and 31% were compact fluorescent.  In 2016, traditional incandescents had fallen to 6% and compact fluorescents had grown to 44%.  Most surprising to me is the growth of halogen incandescent bulbs, from virtually none to 37%; LEDS rose from none to 14%.  See the graph in the article for additional detail.  The shift in light bulb usage is perhaps the main reason why “After climbing for decades, electricity use by American households has declined over the past eight years.”  Will this decline in energy use be reversed by the declared intention of the Department of Energy to “withdraw an Obama-era regulation at nearly doubled the number of light bulbs subject to energy-efficient requirements”?  Such a change will be muted because newer light bulbs last longer than traditional incandescents.

(11 March 2019):Voodoo Economics of Keynes Redux?  How Lawrence Summers and MMT AlignBloomberg.com

********Modern Monetary Theory is going to be in the news for some time.  My guess is that it will now be a continuing part of macroeconomic policy debate, as this article, by putting matters in historical perspective, does.  To me it seemed like a more even-handed discussion of its place in macroeconomic thinking that other articles, for or against, have provided.  For an exposition of leading themes of MMT, there is the article by “Stony Brook University professor and MMT proponent Stephanie Kelton” entitled “Modern Monetary Theory Is Not a Recipe for DoomBloomberg.com.  (Kelton was described by Kai Ryssdal as “almost universally acknowledged as the person to talk to about MMT.)  In thinking about these matters, it is important to keep in mind that the conditions under which policies are likely to work are often forgotten—if ever known at all—in policy debates.  Likewise, political action seldom proceeds on a linear path.

(12 March 2019):Baby Nancy, the first ‘black’ doll, woke the toy industryThe Los Angeles Times

——–“This month marks the Barbie doll’s 60th birthday, with a lot of attendant hoopla. . . . Barbie deserves her party, but that celebration has overshadowed another doll anniversary that is arguably more relevant to our cultural moment.  Fifty years ago this month, Baby Nancy made her debut at the American Toy Fair.  A 13-inch black baby doll, Nancy transformed what was racially acceptable in Toyland.  The revolutionary doll’s manufacturer was a newcomer to the trade: Shindana Toys.  Nancy was its maiden doll, a product of the rebirth of Los Angeles after the 1965 Watts rebellion.”  It was important for Shindana to make “an authentic doll representing African American children” and not, as had been the case, “a white doll ‘dipped in chocolate,’ . . . with stereotypically Caucasian facial features and hair that had had been merely tinted brown.”  Toward that end, with few exceptions, “the company’s employees—in the front office, in research and design and on the factory floor—were black.”

********An interesting look at the context and some of the challenges of bringing Baby Nancy to market.  One of those challenges dealt with hair.  “The toy industry had never genuinely attempted to replicate short, natural African American hair before.”  To do so, “Shindana imported a special oven from Italy and slid synthetic doll hair under the heat to achieve a crimped, matted texture.  The factory line workers used a hair comb to fluff out the natural and give it a more realistic appearance and texture.”  The result was a doll that “employees called Natural Nancy.”  An unexpected part of this story is the role that toy giant Mattel played by providing financial and technical support, as well as industry contacts, to the organization that helped birth Shindana.  Mattel, presumably, could have undertaken this project itself but did not.  Surely there is a story to be told.  Perhaps when Rob Goldberg publishes his book “on the politics of toys during the 1960s and 1970s” we will know the answer.

May you have a good week!

Bruce

359 (6 March 2019)


Welcome to week 359!  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.

(26 February 2019):You asked, we answered: Why didn’t any Wall Street CEOs go to jail after the financial crisis?  It’s complicated.Marketplace

********This is a 41-minute podcast that ran in multiple parts on NPR, starting on February 26th, thus the date.  It is well worth a listen and falls nicely in the invisible foot part of the TIF.  The podcast begins with a look back at two previous financial events: the savings and loan debacle and the collapse of Enron.  In both of these events many people were charged and went to prison but in the most recent financial crisis almost no one did.  Thus question: Why?  As the title of the podcast indicates, “It’s complicated.”  But what was clear to me is that the absence of criminal convictions is that almost none were sought.  Early on criminal charges against executives at Bear Stearns were brought but no convictions resulted.  As a result, it seems that  the Justice Department decided to take a different road, pursuing cases civilly rather than criminally.  This resulted financial settlements but no criminal convictions. 

********At the end of the link there is a list of books to learn more.

(1 March 2019):Dairy farmers are in crisis—and it could change Wisconsin foreverThe Milwaukee Journal Sentinel

********This is part of the series “Dairyland in Distress: A USA Today Network-Wisconsin Special Report.”  As the title indicates, it is about the plight of small and smallish dairy farms in Wisconsin.  But the challenges of Wisconsin dairy farmers are the challenges of dairy farmers throughout the United States.  This article gives sort of a macro view, indicating the elimination of small forms due to lower prices at which they are unable to continue to operate.  For a more micro view, there is another article, “How four family dairy farms in Wisconsin are fighting to survive,” that clearly indicates the circumstances of some individual dairy farmers.  There are videos interspersed that allow the dairy farmers to tell their own stories.   Five videos—about 15 minutes—are gathered together here.  The despair of some of these farmers is obvious.  Industry exit, so easy to talk about in the abstract, is hard to take in the concrete.

(1 March 2019):Banning payday loans sends desperate borrowers running to pawn shopsQuartz

——–Eleven years ago the state of Ohio passed legislation that made payday loans “prohibitively expensive to offer.”  The Short-Term Loan Law limited the annual percentage rate of interest to 28%, “slashing the margins of predatory lenders, and effectively banning payday loans in the state.  But while the law was intended to protect the poor, it seems to have instead sent them scurrying to other, equally insecure, alternatives.”  A paper by Stefanie R. Ramirez of the University of Idaho, which was published in Empirical Economics, examines the effects of the legislation.  “Though it succeeded in ending the loans . . . it had the unintended effect of shifting the problem to other industries favored by people with few alternatives and bad credit.  Would-be borrowers are now relying on pawnbrokers, overdraft fees, and direct deposit advances to get themselves quickly into the black when times get tough.”

********The article on which this piece is based is Stefanie R. Ramirez, “Payday-loan bands: evidence of indirect effects on supply,” Empirical Economics 56,3 (March 2019): 1011-1037.  You can download what I presume is an earlier version of the article here.  It is interesting to consider this in light of the article on dairy farmers in crisis. 

(4 March 2019):Yes, Americans Owned Land Before ColumbusJSTOR Daily

——–“There’s a myth that Europeans arrived in the Americas and divided the land up, mystifying Native Americans who had no concept of property rights.  In reality, historian Allen Greer writes, various American societies had highly-developed systems of property ownership and use.  Meanwhile, European colonists sometimes viewed land as a common resource, not just as individual property.”

********Greer’s article, “Commons and Enclosure in the Colonization of North America,” can be downloaded at the end of the linked post.  As is usually the case, the stories we learn first tend to stick with us, despite their incompleteness and sometimes their error.  I recently ran across a quotation in The Wall Street Journal that touches upon this.  Jonathan Swift is said to have written, “Falsehood flies, and the truth comes limping after it.”  You can read a fuller statement of Swift’s thoughts here

(4 March 2019):There are more $100 bills in circulation than $1 bills, and it makes no centsThe Washington Post

——–“A puzzling surge in the number of $100 bills in circulation and the planned demise of the 500-euro bank note have resurrected debate on the need for three-digit currency at all—given their favor with criminals around the globe.  A decade ago, the number of $100 bills lagged well behind $1 and $20 notes.  But the tally has doubled since the end of the financial crises, according to data from the Federal Reserve; by 2017, the $100 note eclipsed the $1 to become the most widely distributed U.S. currency.”  According to Torsten Slok, chief international economist of Deutsche Bank, the growth in the $100 bill “could be driven by a global fear of negative interest rates in Europe and Japan, or it could be a savings vehicle for U.S. households worried about another financial crisis, or it could be driven by more demand from the global underground economy.”  As it turns out, the “vast majority of these bills” aren’t in the U.S.  A 2018 research paper from the Federal Reserve Bank of Chicago “estimates as much as 80 percent of the 12 billion $100 bills in circulation live outside the country.”  Global corruption and criminal activity is one possible reason for the desire to hold $100 bills.  “A 2016 paper claims that “high denomination notes are ‘the preferred payment mechanism’ of criminals, because of ‘the anonymity and lack of transaction record they offer, and the relative ease with which they can be transported and moved.’”

********The article points out that “$1 million in $20 bills would weigh more than 50 pounds.  In 500-euro notes, it would be a little over two pounds.”  (Just for fun, the gold spot price at 7:12 pm on March 6th was $1,290 per ounce.  That means that $1 million in gold would weigh 48.45 pounds.  I can see why criminals might want to conduct their transactions in 500-euro notes rather than gold.)  All of this provides the setting for “Big-Money Bills Get Little Love—Except in Switzerland” The Wall Street Journal [SR].  Switzerland has issued one-thousand franc ($999) notes at a time when “other countries are scaling back big-value bank notes due to worries that they make life easier for criminals.”  This is in contrast to the European Central Bank which “stopped issuing new €500 ($567) notes in early 2019.”  Interestingly, these one-thousand franc notes cannot be stored indefinitely.  “Switzerland typically issues new bank note series every 20 years, and once that is done the existing notes lose all of their value after another 20 years and can’t be exchanged, meaning that around 2060, this batch of 1,000-franc notes will be little more than expensive wallpaper.”

(5 March 2019):White Meat of Dark?  Brexit Muddles the PictureThe New York Times

——–Most British customers want their poultry “cut up, boneless and, most vexingly to farmers, white, not dark. . . . For decades, the answer to that problem was the European Union: a frictionless market with idiosyncratic tastes, in which eastern countries crave the dark meat that Britons do not.”  So, dark meat travels to plates in Eastern Europe, while white meat travels the opposite way.  Britons can eat what they want while farmers export what they do not.  But now, as with so many other areas of trade and business, Britain’s impending withdrawal from the bloc, the process known as Brexit, stands to throw off the gustatory balance. . . . Farmers know this little-noticed quirk of the meat trade as carcass balance: One country’s leftovers are another’s prized cuts.”

********The article goes on to discuss some of the consequences of less-free trade, in particular, higher British prices for white meat and the substitution of dark meat for white meat when appropriate product adjustments can be made.  This article makes very clear the role of tastes in determining the direction of trade.

May you have a good week!

Bruce