335 (19 September 2018)

Welcome to week 335!  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 to be read in their entirety, although complete articles might be found by an Internet title search.

Please let me know if you have questions or comments.

(11 September 2018): A major bank is offering payday-style loans.  Will others follow suit?The Los Angeles Times

——–Minneapolis-base “U.S. Bank says it will offer nearly instant small loans to its customers, becoming the first bank to provide such a product since federal regulators cleared the way earlier this year amid continuing concerns over the costs of payday loans.”  The bank noted that “its checking account holders will be able to quickly borrow $100 to $1,000 . . . through its Simple Loan offering.  Borrowers have three months to repay, at a cost of $12 for every $100 borrowed—equivalent to an annual interest rate of about 71%.”  The bank that these loans are expensive, but “they’re dramatically cheaper than payday loans, which give borrowers less time to repay and come with interest rates that often top 400%.”

********This is welcome news for those in facing a cash crunch and who have previously only been able to resort to payday lenders and other “fringe-banking” providers to meet their emergencies.  Will this result in a reduction in the percentage of people who are unbanked?  Presumably one will not be able to get a Simple Loan unless you have already established a banking relationship with U.S. Bank.  U.S. Bank does not have branches in North Carolina, although there are branches in Tennessee and elsewhere.  You can learn more about Simple Loan by reading the press release and following the links contained therein.

(13 September 2018):The Economist at 175: A manifesto for renewing liberalismThe Economist

********During the last six weeks The Economist provided Philosophy Briefs that summarized some of the greatest works in the history of liberalism.  This week’s edition is given over to a celebration of the role that The Economist has played since its formation 175 years ago in the campaign to end the notorious Corn Laws of England.  The campaign, though championed as an effort for free trade, was also a class struggle—British landlords wanting to preserve the high price of foodstuffs (and the value of their land holdings) by keeping foreign produce out of the country and laborers wanting to lower the price of food by allowing foreign produce in.  This week The Economist provides a Leader of liberalism, which provides a very broad, and chastened, look at the current state of liberalism, as well as some suggested policies that might be embraced.  This link is to the Leader which, by stressing the elites that have emerged in the context of the embrace of liberal policies in the modern world has some important things to say.

********The discussion of liberal elites shows up in Foreign Affairs this week in “The Financial Crisis Is Still Empowering Far-Right Populists.”  As the article notes, financial crises are disruptive because “they are manmade disasters.  People blame elites for failing to prevent them.  It’s often not hard to find policy failures and cronyism among the rich and powerful, so trust in the political system erodes.  This opens the door to political entrepreneurs who try to set ‘the people’ against the ‘ruling class.’  The tendency to blame elites after financial crises might suggest that far-left parties would benefit as much as far-right ones.  But that doesn’t happen.”  Research reported in 2015 by Funke, Schularick, and Trebesch in “Going to Extremes: Politics after Financial Crises, 1870-2014” indicates that “the far left’s vote share stays about the same in the aftermath of a crisis.  It seems that when social groups fear decline and a loss of wealth, they turn to right-wind parties that promise stability and law and order.”

********In considering this, I begin to have a bit more understanding of the provocative title of an article this week by Neil Irwin of The New York Times: “The Policymakers Saved the Financial System.  And America Never Forgave Them.”  Perhaps what was unforgiveable was the preservation of the system and the protection of the elites that benefitted from it.  No doubt both of these considerations have figured into the responses of Americans and others to the handling of the crisis.

(14 September 2018):How forensic accountants help bring down white-collar criminals and drug kingpinsMarketplace

********Here is four-minute audio with transcript on the work of forensic accountants, taking as its jumping off point the recent testimony of Paul Manafort.  As the audio notes, forensic accountants provide expertise in the investigation of “crimes like money laundering, fraud and tax evasion.”  The demand for their services must be expanding in these times of flexible morality . . . what about their supply?

********Forensic accounting would appear to be relevant to the material discussed in Moneyland: Why Thieves and Crooks Now Rule the World and How to Take It Back, by Oliver Bullough, which is reviewed this week in The Economist.  Moneyland is Bullough’s “term for a virtual country populated by the mega-rich and their hangers-on.”  The real scandal of Moneyland is “the way ritzy bankers, lawyers, accountants and PR people enable money stolen in poor, ill-run countries to be invested in rich, safe ones.  There are limits to how much cash the pillagers can spend in their own misruled domains, but the ability to teleport money invisibly around the world means, as Mr Bullough puts it, that the rich can continue eating without ever feeling full.”

(14 September 2018):Even in Better Times, Some Americans Seem Farther Behind.  Here’s Why.The New York Times

********The centerpiece of this article is made up of graphs showing Median Income (and Net Worth) relative to population median for Whites, Hispanics, and Blacks in the U.S. over the time period 1989 to 2016.  The data is broken down by Non-College Graduates and College Graduates.  This is one of those cases where a good stare at the data gives rise to many questions and some explanations, a few of which are mentioned in the article.  I was especially struck by the behavior of median income for White, Hispanic, and Black College Graduates, especially that relating to Hispanics.

(16 September 2018):How an Unsolved Mystery Changed the Way We Take PillsThe New York Times

——–“In 1982, someone tampered with capsules of Extra-Strength Tylenol, turning them lethal with potassium cyanide.  Seven people in the Chicago area died.  Copycat attacks around the country caused several more deaths.  As grim as the Tylenol deaths were, they endure as an example of how a corporation, Johnson & Johnson in this instance, took control of the calamity, came up with a strategy and, with surprising swiftness, regained trust it had lost.”  Instead of renaming the product, “the company offered a different solution, a new bottle with the sorts of safety elements now familiar . . . to every shopper: cotton wad, foil seal, childproof cap, plastic strip.  Capsules began to be replaced with caplets the following year.”

********As the article notes, not all corporations have been so forthcoming as the 1982 version of Johnson & Johnson.  In reading this I am reminded of the decisive action of the late and beloved Laurey Masterton, who owned Laurey’s Catering on Biltmore Avenue in Asheville, North Carolina around a hepatitis incident in 1998.  She got the news out quickly and (it seems) her business never suffered.  Evidently, people will forgive you if you quickly do the right thing.  What does all this have to do with the invisible forces?  Trust influences the demand for goods and services, so it is relevant to the invisible hand (economic forces that affect human behavior).  No doubt there are cultural (invisible handshake) factors at work, too.  It seems like new book Rule Makers, Rule Breakers: How Tight and Loose Cultures Wire Our World, by Michele Gelfand, has something to offer regarding how culture affects human behavior.  You can read a review of the book by Colby College sociology professor Neil Gross.

********The Tylenol article is a Retro Report, which is “a growing series of over 150 short documentaries that tell the history behind the news.”  There is a nine-minute video that accompanies the article that is well worth watching.   You can learn more about more about Retro Reports at www.retroreport.org.  I surveyed the Retro Report site and found the 12-minute video “Gerrymandering’s Surprising History and Uncertain Future,” which focuses on North Carolina.  There is a companion article in The New York Times: “The Odd Political Alliance Behind Today’s Gerrymandering.”

(17 September 2018):Marijuana industry fights ‘stoner,’ ‘pot’ and other words that stigmatizes peopleThe Los Angeles Times

——–MedMen Enterprises of Culver City, California, has undertaken an ad campaign to remind people that “marijuana users come from all walks of life.  They can be cops, nurses, teachers, scientists, construction foremen and grandmothers.  All these people appear in MedMen ads that also feature the word ‘stoner’ with a line drawn through it.  As in, let’s get rid of this.”  Daniel Yi, senior vice president of communications at MedMen, notes: “We want to take the stigma away.  We want to make marijuana mainstream.”  The $2-million “Forget Stoner” campaign debuted earlier this year and “is part of a larger push by the cannabis industry to normalize the use of marijuana.”

********The normalization of marijuana and its components is a strategy being considered and employed by a wide range of producers, as is clear from “Coca-Cola Is Eyeing the Cannabis MarketBloomberg.com.  Drinks infused with Cannabidiol (CBD), which is “the non-psychoactive ingredient in marijuana that treats pain but doesn’t get you high,” are of increasing interest to those in the drinks market, which “Coca-Cola says it’s monitoring.”  By considering such a move, Coke is following a strategy already embraced by larger brewers, such as Corona, Molson Coors, and Heineken, which are seeing slowing sales in their traditional markets.  Both large-scale brewers and soft drink producers have seen sales slow in recent years.  Some useful and concise information about the components of marijuana is related in the Quicktake “Why Coca-Cola May Add a Cannabis Component to DrinksBloomberg.com.  The main distinction is between THC, which is psychoactive, and CBD, which is not.  Evidently the U.S. Drug Enforcement Administration regards CBD and THC in the same way, even though they are demonstrably different in their effects.

May you have a good week!

Bruce

334 (12 September 2018)

Welcome to week 334!  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 to be read in their entirety, although complete articles might be found by an Internet title search.

Please let me know if you have questions or comments.

(28 August 2018): How a Ruling on Insider Trading Could Affect the Chris Collins CaseThe New York Times

——–“Insider trading cases are sometimes as simple as a well-timed phone call warning an investor to bail on a stock ahead of impending bad news.  The indictment this month of Representative Chris Collins, a Republican representing a district near Buffalo, N.Y., his son Cameron Collins, and the father of Cameron Collins’s fiancée is a good reminder of that. . . . An insider trading violation does not require the source of the information trade on it.  The law requires only that the government show the information was given to others with the intention that they trade on it and that the tipper received a benefit, which can be something as simple as cash or a gift to family or friends.”

********The article goes on to summarize some recent rulings on insider trading that make it easier to demonstrate benefit, and then easier to secure insider trading convictions.  It will be interesting to see how things work out for Representative Collins et al.

(4 September 2018):James Mirrlees, Whose Tax Model Earned a Nobel, Dies at 82The New York Times

——–James Mirrlees, who shared the 1996 Nobel Prize in Economics with William Vickrey, died on August 29th at his home in Cambridge, England.  In his work “Mirrlees suggested that too many progressive taxes imposed at the highest income levels could discourage the wealthy from earning even more, reducing the revenue available to pay for government services and assist lower-income households.”  Although he had expected that “the rigorous analysis of income-taxation in the utilitarian manner to provide an argument for high tax rates” he found that an “approximately linear” (flat) tax schedule was more desirable.

********You can learn much more about James A. Mirrlees by consulting his Nobel Prize materials.

(6 September 2018):Rousseau, Marx and Nietzsche: The prophets of illiberal progressThe Economist

——–This brief is the sixth and last of the Philosophy Briefs on Liberal thinkers.  Encountered here are the ideas of “three anti-liberals: Jean-Jacques Rousseau, a superstar of the French Enlightenment; Karl Marx, a 19th-century German revolutionary communist; and Friedrich Nietzsche, 30 years Marx’s junior and one of philosophy’s great dissidents.  Each has a vast and distinct universe of ideas.  But all of them dismiss the liberal view of progress.  Liberals believe that things tend to get better. . . . And so liberals set out to define the conditions for progress to come about.  They believe that argument and free speech establish good ideas and propagate them.  They reject concentrations of power because dominant groups tend to abuse their privileges, oppressing others and subverting the common good.  And they affirm individual dignity, which means that nobody, however certain they are, can force others to give up their beliefs.  In their different ways Rousseau, Marx and Nietzsche rejected all these ideas.”

********In concluding the article, and the series, it is noted that, in contrast to the ideas of Rousseau, Marx, and Nietzsche, “Liberalism . . . does not believe it has all the answers.  That is possibly its greatest strength.”

(6 September 2018):The pros and cons of collaborationThe Economist

********This article take a brief look at collaboration (working in teams) that is mindful of its pro (the wisdom of crowds) and its con (groupthink).  In so doing it discusses some of the recent literature on the subject—one article and some books.  It turns out that intermittent collaboration tends to perform better on average than going it alone or continual collaboration.  And it is noted that “Close teamwork may be vital in the lower reaches of a hierarchy, but at the  top someone has to make a decision.”  Finally, co-leadership structures tend not to work well, as it “creates uncertainty over who is really in charge.”

********This seems like a good place to mention Farsighted: How We Make the Decisions That Matter the Most, by Steven Johnson, which is [SR] reviewed in The Wall Street Journal.  As the reviewer notes, “Mr. Johnson is explicitly focused on real-life decisions that (ideally) involve serious deliberation . . . He is less interested in the abstract experiments . . . that he says constitute the foundation of behavioral economics.”  Interesting to me was the distinction made between shared and unshared information.  In designing a process to elicit information, town halls tend to elicit shared information.  As a result, “it is important to design a process that exposes ‘unshared information’—by meeting individually with stakeholders,” too.

(6 September 2018):The fight against illicit fishing of the oceans is moving into spaceThe Economist

********This is a brief survey of Illicit, Unreported, and Unregulated (IUU) fishing and some of the technological means being adopted to combat it.  Fitting large ships and small boats with radio beacons and expanding the satellite network would help develop the information necessary to detect IUU fishing and apprehend them in port.  These innovations could make IUU fishing a thing of the past, at least where “the will to enforce the rules exist.”  The National Oceanic and Atmospheric Administration is a source of additional information about IUU fishing.

(7 September 2018):Amazon’s Antitrust Antagonist Has a Breakthrough IdeaThe New York Times

********This is another article, mostly biographical, on Lina Khan, the author of “Amazon’s Antitrust Paradox,” and the influence of her ideas.  As the article notes, her paper “has rocked the antitrust establishment, and is making an unlikely celebrity of Ms. Khan in the corridors of Washington.”  What’s new about this article is the attention it draws to hearings by the Federal Trade Commission, starting on September 13th at the Georgetown University Law Center.  These hearings, “the first of their type since 1995,” will consider “whether a changing economy requires changing enforcement attitudes.”  The Hearings are entitled “Competition and Consumer Protection in the 21st Century.”  At its link you can find the Agenda and information about Event Speakers, and much more.  At another link, there is a statement that “The event will be webcast live” but I see no indication of how to access the webcast.  This could be an important event.

(7 September 2018): The Consolidation of the American HarvestBloomberg.com

——–“America’s heartland has a sameness that didn’t exist a generation ago. . . . As global markets have grown, the desire and need for diverse local production has declined. . . . Since the mid-1990s, around the time that genetically modified crops became prevalent in U.S. agriculture, the diversity of American fields has decreased.  It’s not just the GMOs, although they had aided the spread of corn and soybeans.  The rise of ethanol and farm exports to China—as well as cheaper transportation costs, increasing concentration of livestock feedlots, and climate change—have each played a role.”

********This article is accompanied by a series of figures that dramatically indicate how some crops are expanding, and where, and some are not.  Acres planted in corn and soybeans are expanding, in some places dramatically, while wheat is contracting, almost everywhere; there are dramatic declines in cotton acreage in traditional areas, with expansion in north Texas and western Oklahoma.  Driving some of these changes has been the expansion of corn for ethanol production, the consequence of the invisible foot—legal and political factors—and changing international trade patterns, especially with regard to China.  I would love to see representations of this data at the county level.

********This is the place to reference another article from that I have seen for the past six weeks or so: “Here’s How America Uses Its LandBloomberg.com   This graphically-rich article uses information from the USDA and other sources to look at six types of land usage in the 48 contiguous states.  The uses are: Pasture/range, Forest, Cropland, Special Use, Miscellaneous, and Urban.  Each use is color coded which is important to remember as you make your way through the article.  I needed to work my way through the content slowly as it is put together in an unusual way.  The very first graph, which shows all of the uses imposed upon the map of the U.S., may be the most informative.  Now if there was just some way of integrating the changing land use, as shown in “Consolidation” with the predominant use shown in “Here’s How.”

********The USDA information on Major Land Uses is available online.  There is a 69-page report “Major Uses of Land in the United States, 2012” available as a  pdf.

(10 September 2018):A Forensic Accounting Expert Explains How Companies Trick InvestorsBloomberg.com

********This is an episode of Odd Lots, with Tracy Alloway and Joe Weisenthal.  In this week’s 36-minute podcast they speak with Howard Schilit, a forensic accounting expert who is the author of Financial Shenanigans: How To Detect Accounting Gimmicks and Fraud in Financial Reports, now in its 4th edition.  In this engaging and enlightening interview, Schilit indicates that “Companies have all kinds of discretion in how they recognize revenue and costs.  Some of this is legit.  Some of this is fraud.”  Among the topics discussed are “the various techniques companies use to disguise their earnings, how accounting rules have failed to keep up with changing times, and what investors can do to spot red flags.”  Of contemporary interest is Schilit’s discussion, starting at 27 minutes, of President Trump’s words about possibly doing away with quarterly corporate financial reports.  Schilit is not a fan and  provides some suggestions about how to make those reports more meaningful.

********This is one of those podcasts that does not lend itself to multitasking.  There are many thoughtful questions and equally thoughtful answers.  What stood out for me was the power of a story.  A good story, evidently, has the ability the shut off the ability to think critically.

(11 September 2018):American Eating Habits Are Changing Faster than Fast Food Can Keep UpBloomberg.com

——–According to researcher NPD Group Inc., per-person restaurant visits fell to a “28-year low in 2018 . . . Restaurants are getting dinged by the convenience of Netflix, the advent of pre-made meals, the spread of online grocery delivery, plus crushing student debt and a focus on healthy eating.”  Now “Eighty-two percent of American meals are prepared at home—more than were cooked 10 years ago . . . The latest peak in restaurant-going was in 2000, when the average American dined out 216 times a year.  that figure fell to 185 for the year ended in February.”  Although chains like McDonalds Corp. are reporting rising U.S. sales, the increases “have been driven by price hikes, not more customers.  Traffic for the industry was down 1.1 percent in July, the 29th straight month of declines.

********The article contains some telling graphs.  One showing the behavior of Restaurant meals per capita, which has declined continuously since 2008, and another showing “Restaurant inflation” vs. “Food at home inflation.”  As the article notes, the “gap” between the two is growing, i.e., the relative price of eating out in comparison to eating in is increasing.

(11 September 2018):The Secret Drug Pricing System Middlemen Use to Rake in MillionsBloomberg.com

********Much of the discussion of pharmaceutical prices seem to revolve around the notion that manufacturer profits must be “high” to ensure the research costs surrounding new product development.  This article provides another perspective, by looking at “spread” between Medicaid program costs (on the high side) and pharmacy costs (on the low side), which tends to be dramatic.  This piece of investigative journalism—check out the notes on Methodology at the end of the article—helped me formalize what it is that is attracting me to Bloomberg’s approach to the news.  It made me reach for Democracy’s Detectives: The Economics of Investigative Journalism, which is now next to the top of my reading list.  What’s at the top?  The World in a Grain: The Story of Sand and How It Transformed Civilization.

May you have a good week!

Bruce

333 (5 September 2018)

Welcome to week 333!  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 to be read in their entirety, although complete articles might be found by an Internet title search.

Please let me know if you have questions or comments.

(29 August 2018): Miami Will Be Underwater Soon.  Its Drinking Water Could Go FirstBloomberg Businessweek

——–“Barring a stupendous reversal in greenhouse gas emissions, the rising Atlantic will cover much of Miami by the end of this century.  The economic effects will be devastating: Zillow Inc. estimates that six feet of sea-level rise would put a quarter of Miami’s homes underwater, rendering $200 billion of real estate worthless.  But global warming poses a more immediate danger: The permeability that makes the aquifer so easily accessible also makes it vulnerable.  ‘It’s very easy to contaminate our aquifer,’ says Rachel Silverstein, executive director of Miami Waterkeeper, a local environmental protection group.  And the consequences could be sweeping. ‘Drinking water supply is always an existential question.’  County officials agree with her.”

********In my reading, I have tended to focus on (be impressed by) sea-level rise and its effect on land and dwellings.  What this article points out is that what happens below, e.g., to the aquifer, is important, more immediate, and perhaps more insidious because it is not easy to see.

********The article “Life Without Water: Sweaty, Smelly, and Furious in CaracasBloomberg.com provides a glimpse of what a life without water, most of the time, is like and makes a connects to the article immediately below.

(30 August 2018): Venezuela’s Neighbors Join Forces to Contain Crushing Flow of RefugeesBloomberg.com

——–“Venezuela’s accelerating slide toward mass starvation has become a continental disaster and South American governments this week began trying to manage it together.  With thousands of migrants pouring over the border—an outflow equal to the Mediterranean refugee crisis—government officials are meeting in Colombia, Peru and Ecuador to coordinate a response that so far has been haphazard.  On the agenda are measures to prevent epidemics, harmonize identification requirements and share the burden of relief. . . . In all, 2.3 million Venezuelans live outside the country, with more than 1.6 million fleeing the ravaged petrostate since 2015, according to the United Nations High Commissioner for Refugees.  That’s roughly equal to the flow of migrants to Europe in the same period.  The crisis looks likely to worsen as oil output plunges thanks to mismanagement, and hyperinflation defies attempts to rein it in.”  Bearing the brunt of the exodus is Colombia, “which has a 1,400-mile border with Venezuela.”

********I admit to being oblivious to the humanitarian crisis taking place in Venezuela and the region.  Here is a map of the region if you, like me, could use a refresher.  In searching for a little background, I found “How Venezuela’s crisis developed and drove out millions of peopleBBC.com, which is current (22 August 2018) and comprehensive.  Two statistics jump out: 95% of government revenue comes from oil exports and the 2018 inflation rate is predicted to be 1,000,000%.  In 2017, approximately 600,000 Venezuelans migrated to Colombia, 290,000 to the U.S., 208,000 to Spain, and 119,000 to Chile.  The projected inflation rate will likely continue to lead Venezuelans to conclude that they would be better off living someplace else.

(30 August 2018):Rawls rules: Three post-war liberals strove to establish the meaning of freedomThe Economist

********This brief is the fifth of six Philosophy Briefs on Liberal thinkers.  Here we encounter the ideas of: Isaiah Berlin, who distinguished between negative and positive liberty in “Two Concepts of Liberty” (1958); John Rawls, who wrote A Theory of Justice (1971), and Robert Nozick, the author of Anarchy, State, and Utopia (1974).  The connections among then, especially between Rawls and Nozick, are clearly laid out; the Stanford Encyclopedia of Philosophy has a scholarly entry on “Positive and Negative Liberty.”  I found the discussion relating to identity and freedom of expression to be thought provoking.

********Connected to this brief in an unexpected way is the interview by Kai Ryssdal, host of “Marketplace,” with Arthur C. Brooks, the outgoing president of the American Enterprise Institute who will soon teach at Harvard University.  The interview is titled “Outgoing AEI president wants a healthy ‘competition of ideas’.”  Ryssdal sought to get his perspective on some current matters in light of the AEI’s motto “a competition of ideas is fundamental to a free society.”  There are a number of things of interest in the article, but what really caught my attention—and will endure—is the response by Brooks to the following question by Ryssdal: “Do you think you’ve gotten traction on [some of your ideas] . . . in the past 10 years?  Or have you been shouting into the hurricane?

Brooks: Well, you know when you’re in the world of ideas it’s very easy to feel like you’re shouting into a hurricane. Why? Because you’re kind of a climate scientist in a world that’s more interested in weather reports. Politics is like the weather, and ideas are climate science. But in the end, in the long run, it’s ideas that matter the most.

(30 August 2018):The U.S.-Mexico Border Is Becoming a Banking DesertBloomberg Businessweek

——–“Sabrina Hallman’s seed business has operated out of warehouses [in Nogales] a short drive from the U.S.-Mexico border since 1989.  The Sierra Seed Co., which sells to commercial growers in Mexico, is well-known in her small Arizona town—as is Hallman, a former school principal who took over from her father as chief executive officer in 2007.  Three years later her bank was acquired, and its new owners cut off a line of credit her business had depended on for years.”  Regardless of the arguments Hallman made, they were to avail: “The company did business on both sides of the border and therefore posed a money laundering risk the bank wasn’t willing to take.  Rather than spend resources vetting and monitoring what it perceived to be a high-risk account—or face enormous fines for failing do so—Hallman’s company had to go.”  Enhanced scrutiny of banks “in high financial crime areas, particularly those near the border, has caused banks to retreat, unleashing a host of unintended consequences. . . . Businesses run by Mexican nationals, those that transact on both sides of the border, and those that deal primarily in cash were especially likely to get the boot.”

********An excellent example of the changes in the economic environment that can result from a particular historical event, in this case 9/11/2001.  As the article notes, “the real turning point for the Nogales border . . . Sept. 11.  The 2001 USA Patriot Act ramped up pressure on banks to detect and report suspicious activity and increased penalties on institutions that didn’t comply.  In 2012, HSBC got hit with a $1.9 billion fine for failing to stop the Norte del Valle and Sinaloa cartels from laundering more than $880 million of drug money.”

********The U.S. Government Accountability Office has written a report on the financial situation along the southwest border of the U.S.  You can learn more by the report’s website.

(31 August 2018):’It’s become a gold rush’: Inside the race to create smart shoes, custom razors and high-tech devices for the over-65 crowdThe Washington Post

——–For years Gillette mailed out free razors to “millions of men a year on their 18th birthdays.  Its ads focus on the experience passing from father to son (sometimes with the help of famous faces like quarterbacks Archie and Eli Manning).  But in recent years, executives have begun to see another milestone emerge in their customers’ lives: the moment when sons begin shaving their aging fathers.”  Recognizing this, Procter and Gamble, which owns Gillette, spent three years designing and testing what has become the Gillette Treo, which has features to address the requirements of those shaving others.  This is just once instance of reconceptualizing products in line with an aging population group, the baby boomers, who “still control 70 percent of the country’s disposable income.”  According to Danny Silverman of Clavis Insight, such rethinking of traditional products has “become a gold rush.”

********The article includes some of the research that was done on the Treo.  In a real-world test, traditional shaving materials in a nursing home took 12 minutes in contrast to 3 minutes for the Treo.  In addition, to the Treo resulted in a better experience for the person being shaved.  All this made me think of the principle involved in this redesign.  What changes to a product must be made when it is no longer used by “me” for me but instead used by someone else for me?  (I think I would call this recentering the user.)  As the Treo example shows, there is a lot to be learned from care givers.  Clearly these are opportunities that have been missed for far too long.  It is simply too easy to come up with a reason why that has been the case.  An example of how social and historical forces—the invisible handshake—enables us to not see, as well as see.

(3 September 2018):Will Judges Have the Last Word on Climate Change?Bloomberg Businessweek

********It depends, is the short answer to the question posed.  This is a nice summary of the use of the legal system as a means to slow climate change.  Approaches vary in the U.S. and in other countries, sometimes being aimed at national governments and agencies, sometimes at state and local governments, and sometimes at corporations.  In the U.S. environmentalists are “seeking their tobacco moment.”  Regarding tobacco, decades of litigation were unsuccessful before the tide turned.  When victory came, “settlements totaling $246 billion and permanent changes in the sale and marketing of cigarettes.  It’s a model that climate change activists would love to duplicate.”  The article concludes with The Reference Shelf, which provides access to six types of source materials.

(4 September 2018): [SR]Flood of Sand Points to Shakeout for Shale SuppliersThe Wall Street Journal

——–“Two years ago, many investors had the same idea: tapping the dunes of the West Texas desert to supply shale drillers with the sand they use in fracking.  Now, around 20 sand mines are set to be active in the Permian Basin, America’s most active oil field, by year’s end, and even some of those who put hundreds of millions of dollars between these startups predict they won’t all survive.”  The quality of sand in West Texas is an issue.  Typically frackers have favored “Northern White [Wisconsin sand] because of its superior ‘crush strength,’ or ability to withstand pressure deep underground . . . But when oil prices fell around 75% in 2014, companies were forced to seek savings in their supply chain and rethink using local sand.”  Oil producers using local sand can eliminate “the rail costs of Northern White, sometimes more that $60 per ton . . . But there are still doubts about local sand’s long-term performance.  So far, companies say it has not impacted initial production on wells, when they produce oil at their highest rates.  But it could limit production at later stages, experts say, as higher pressures expose the weaker crush strength of the local sand.”

********I continue to be fascinated by the relevance of sand quality for different uses.  This article has the additional complexity of short- and long-term production effects of different types of sand.  Presumably there are “crossover” levels of output and pricing differences that will make one quality of sand preferable to another.  So, something as seemingly prosaic as “sand” is full of complexity.

May you have a good week!

Bruce

332 (29 August 2018)

Welcome to week 332!  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 to be read in their entirety, although complete articles might be found by an Internet title search.

Please let me know if you have questions or comments.

(21 August 2018): The Bipartisan Cry of ‘Not in My Backyard’The New York Times

——–“Ben Carson, the secretary of the Department of Housing and Urban Development, wants to spur construction of mixed-income, multifamily housing all over the country.  If we had more of it, he argues, homes would be affordable to more families, and they’d have more options of where to live.  He is probably right.  But the kind of housing he describes is impractical, illegal or too costly to build in much of the United States today, in suburbs and big cities alike.  Blocking it are: zoning rules that allow only single-family homes; laws that dictate the size of yards; elaborate permits that drive up development costs; and rules that grant neighbors a veto over what is built.”  Although “Liberals and conservatives clearly prefer to live in different kinds of communities. . . studies show that homeowners of both parties support restricting development around them.  And they do so in spite of their own ideologies—whether conservative voters might otherwise value free markets, or whether liberals value policies that that aid the poor.”

********The article goes on to note the land use and is regulation is primarily a local rather than national issue, and what really matters at the local level is desire to protect property values.  According to Jessica Trounstine, a political scientist at the University of California, Merced, “Local control in the history of land use is synonymous with the generation of exclusivity, or the funneling of people into bad neighborhoods, or building refuse and recycling plants right in the heart of the black neighborhood.”  All this reminded me of The Color of Law: A Forgotten History of How Our Government Segregated America, by Richard Rothstein.  It is positively reviewed in “A Powerful, Disturbing History of Residential Segregation in AmericaThe New York Times.

(22 August 2018): [SR]The Next Big Bet in Fracking: WaterThe Wall Street Journal

——–“Some investors see fortunes to be made in the U.S.’s hottest oil field—by speculating in water, not crude.  Fledgling companies, many backed by private equity, are rushing to help shale drillers deal with one of their trickiest problems: what to do with the vast volumes of wastewater that are a byproduct of fracking wells.”  A fracked well not only unlocks “oil and gas, but also massive quantities of briny water long buried beneath the surface.  Drillers in the Permian Basin in New Mexico and Texas currently generate more than 1,000 Olympic-size swimming pools full of this murky, salty water every day.  Handling it amounts to up to 25% of a well’s lease operating expense.”  Roughly a dozen new companies are working to move wastewater from fracking sites. Some are building pipelines to move water at lower cost than trucks and others are looking to recycle wastewater and sell it back to drillers for reuse.  Christopher Manning, of Trilantic Capital Management LP, which has invested in Solaris Water Midstream, has noted, “The math on this is really, really easy . . . If the Permian goes up by one million barrels per day in oil production, it’s going up six million barrels in water.  That’s an opportunity.”

********It is estimated that “Moving water by pipe costs anywhere from 60 cents to $1.50 a barrel compared with more than $2 by truck.”  From the article it appears that fresh water must be brought in to frack wells, and then the salty water that is liberated from the fracked wells must be taken out.  So there is a lot of water being moved about in the fracking process.  Therein lies an opportunity: “water companies are setting up their networks with an eye on treating produced water so it can be reused for fracking and resold t the shale drillers who paid them to take it away in the first place.”

(22 August 2018):What Will the World Eat in the Next Decade?Bloomberg.com

——–“India will eat more butter and drink more milk.  Africa’s sweet tooth will grow bigger.  But China’s appetite for pork is on the wane.  Each of these trends will reshape global trade flows in agriculture, creating new winners—and forcing companies to adjust their food chains to serve shifting tastes.”

********This article provides multiple graphs to provide a glimpse of what food consumption patterns at the macro level in China, India, and Sub-Saharan Africa are projected to be over the outlook period 2018-2027.  The graphs entitled Food Demand Growth are especially enlightening.  Cereal grains dominate consumption is Sub-Saharan Africa.  Dairy is dominant in India with almost no meat; the influence of Hinduism stands out.  Fish dominates in China, with meat not far behind.  Taken together, one sees the role of the invisible handshake—social and historical factors—and the invisible hand—economic factors—at work.

(23 August 2018):The exiles fight back: Hayek, Popper and Schumpeter formulated a response to tyrannyThe Economist

——–“As the second world war raged, Western intellectuals wondered if civilization could recover.  George Orwell, the most brilliant of the pessimists, wrote ‘Animal’ and began work on ‘1984’, which saw the future as a ‘boot stamping on a human face—forever’.  Among the optimists were three Vienne exiles who launched a fightback against totalitarianism.  Instead of centralization, they advocated diffuse power, competition and spontaneity.  In Massachusetts Joseph Schumpeter wrote “Capitalism, socialism and Democracy’, published in 1942.  In New Zealand Karl Popper wrote “The Open Society and its Enemies’ (1945).  Friedrich Hayek wrote “The Road to Serfdom’ (1944) in Britain.”

********This brief is the fourth of six Philosophy Briefs on Liberal thinkers.  This is a concise introduction to the broad orientation of three important and different thinkers, each providing a response to the rise on Nazism, the second World War, and the devastation of the “jewel of the Danube” that was Vienna.

(23 August 2018):Insuring intangible risks: In search of a jelly mouldThe Economist

——–“The development, hundreds of years ago, of ship and cargo insurance was revolutionary.  It marked the start of commercial insurance; protection against loss from looting, fir and  perils of the high seas fostered global trade.  But in the 21st century the value of companies consists less of solid objects, such as boats and buildings, than of weightless, intangible elements, such as intellectual property (IP), data and reputation.”  According to Inga Beale, chief executive of Lloyd’s of London, “Today the most valuable assets are more likely to be stored in the cloud than in a warehouse.”  This change indicated by estimates of the merchant bank Ocean Tomo.  In 2015, intangible assets “accounted for 84% of the value of S&P 500 firms, up from just 17% in 1975.”  Protecting against damage or loss to intangible assets has grown, therefore, but that is difficult.  Such “intangible risks” are of two types: “damage to intangible assets (eg, reputational harm caused by a twee or computer hack); or posed by the (say, physical change or theft resulting from a cyberattack).  However, insurance against such risks has lagged behind their rise.”  According to Christian Reber of the Boston Consulting Group, “the insurance industry is only at the early stage of finding solutions to close the gap.”

********In short, insurance companies have developed a wide array of insurance products to deal with tangible assets, but they have barely scratched the surface of intangible assets.  This is all the more important at a time when a company is a tweet away from a dramatic loss of market value—the example of Snapchat (Snap) is related, but Elon Musk’s recent tweet about taking Tesla private could have served just as well—and then there hacking of corporate information, like credit card numbers.  (It is estimated that cybercrime caused losses of roughly $550 billion in the last year.)  Clearly there is a need for insurance products for intangible assets.

(23 August 2018):E-Verify Laws Across Southern Red States Are Barely EnforcedBloomberg Businessweek

——–“In 2011 states across the Southeast passed laws that threatened private employers with dire consequences—including losing their license to do business—if they didn’t enroll with a federal data service called E-Verify to check the legal status of new hires.  Modeled after 2008 measures in Arizona and Mississippi and billed as a rebuke to a do-nothing Obama administration, the laws went further than those in the 13 states that required checks for new hires only by state agencies or their contractors.  Seven years later, those laws appear to have been more political bark than bite.  None of the Southern states that extended E-Verify to the private sector have canceled a single business license, and only one, Tennessee, has assessed any fines.  Most businesses caught violating the laws have gotten a pass.”

********In a statement that was telling for me, “Even in deep-red states enamored of immigration crackdowns, punishing business is bad politics.”  As Cato Institute analyst Alex Nowrasteh notes, “Lawmakers got all the political benefits of supporting immigration enforcement but not the political cost of hurting business.”  This makes all-too-much sense to me.

(23 August 2018):Are U.S. Companies Too Big and Powerful?  The Fed Wants to KnowBloomberg.com

——–“Have U.S. companies gotten too big and powerful?  Does growing concentration—more market share in fewer corporate hand—explain why wage growth has stagnated, income inequality has gotten worse and investment and innovation have fallen behind?  These are some of the hottest questions in economic circles these days, and the U.S. Federal Reserve is looking for answers.  As central bankers start to meet in Jackson Hole, Wyoming, for the Federal Reserve Bank of Kansas City’s annual symposium, it will be the main topic.”

********The article goes on to explore nine questions which touch upon economic size and power, concluding with The Reference Shelf—four sources for further exploration.  It was interesting to see a reference to Robert Bork’s book The Antitrust Paradox.  The pendulum of thought regarding antirust seems to be moving away from Bork’s permissive view.

********One of the reasons why there is such interest in size, right now, is that the national unemployment rate is at 3.9% and there continues to be little upward pressure on prevailing wage rates.  Perhaps the mega-corps of Facebook, Amazon, Apple, and Google and their network economies are a substantial cause of this.  But maybe there are structural reasons, too.  This perspective is adopted in “What’s Holding Back Wages in America?Bloomberg Businessweek.  In the article a look is taken at workers in construction, trucking, and child care to see what barriers are at work.

(27 August 2018):Trump offers trade aid to farmers, but some question its fairnessPolitic.com

——–“The Trump administration on Monday detailed how it will dole out $6.3 billion in aid to assist farmers stung by retaliatory tariffs—and it’s already sparking backlash from some sectors where industry leaders say growers won’t get their fair share. . . . The plan unveiled by the Agriculture Department includes $4.7 billion in direct payments to row crop growers, including corn, wheat and cotton, as well as to pork and dairy producers.  The vast majority of the direct payments—some $3.6 billion—will go to growers of soybeans, America’s top agricultural exports.  Soybeans now fetch $2 less per bushel than they did in March, when President Donald Trump began to slap new tariffs on Chinese exports, setting off a tit-for-tat trade battle that has resulted in billions of dollars of lost value for a crop that earlier this year surpassed corn as America’s most widely grown commodity.  The overwhelming share of direct payments that are slated for soy has incensed other agricultural sectors, prompting industry groups to point out that their slice of the pie is not even close to covering losses that their growers have suffered from retaliation brought on by Trump’s aggressive trade tactics.”

********I saw a related article in The Wall Street Journal, with its paywall, so I went looking for an article with similar content and found this at Politico.com.  I’m glad I did.  This article provides an excellent example of the consequences of tariffs and the political attempts to “make whole” or “kind of make whole” those who lost due to their imposition.  Basically, there is a lot of political discretion of who gets what and how much.  The article lays out quite clearly and, to my mind, descriptively, how the current aid programs work—it is a great example of how the political economy, as opposed to the market economy, does its work.

********All this makes me think of the “compensation principle” in economics, i.e., that notion that one social state, say B, is to be preferred to another social state, say A, if in moving from A to B the “winners” could, in concept, compensate “the losers” even though that compensation isn’t paid.  It appears that the policy being followed by the USDA accepts the notion that compensation should be paid, but to a degree that depends upon political considerations.

(28 August 2018): “The Treasury Yield Curve Is Finally Going Mainstream” Bloomberg.com

********The Treasury Yield Curve is viewed by many as an indicator of the “health” of the economy.  See here for a definition of yield curve.  An inverted yield curve, i.e., one that has lower yields for bonds of longer maturity, is conventionally held to be a harbinger of a future recession.  See here for yield curve data.  So there is a lot of current interest in the behavior of the yield curve as the current economic expansion reaches and surpasses historical records

********I found this article to be of interest because it shows a creative way of using Google Trends to develop information based upon large numbers of people with little effort.  By entering a search term, you can then focus it by Geographic Region, Time Period, Category, and Search Type.  I played around with this a bit and found it to be tantalizing.  I did searches on Aretha Franklin (cultural icon) and Martin Shubik (economist), both of whom passed away recently, and found the results sobering.  More relevant to this story is the term NAFTA.  Do a search on it or the United States during the Past 7 days using all categories and Web Search and take a look at the behavior over time.  It strikes me that one could learn a lot about the persistence of news by studying these graphs for a variety of search terms.  Unsurprisingly, other people have had this idea.  The March 2018 article “Ten years of research change using Google Trends: From the perspective big data utilizations and applications” provides an entry into this literature.  I found it using the search terms: research Google Trends.

(28 August 2018):California Gov. Jerry Brown signs overhaul of bail system, saying now ‘rich and poor alike are treated fairly’The Los Angeles Times

——–On Tuesday, California Governor Jerry Brown “ushered in one of the most sweeping criminal justice reforms of his administration, signing a bill abolishing the state’s current money bail system, and replacing it with one that grants judges greater power to decide who should remain incarcerated ahead of trial.  The legislation virtually eliminates the payment of money as a condition of release. . . . The law, which will go into effect on Oct. 1, 2019, is expected to decimate the bail-bond industry, and many unanswered questions remain about how the shift will alter the criminal justice system.”

********An excellent example of how the demand for a service depends upon legal and political factors, i.e., the invisible foot.  In this case, seemingly, a stroke of a governor’s pen can  eliminate an industry.  For products, a drug for example, the law would simply give rise to an illegal market.  What tends to result when a service is made illegal?  The article also points to some of the concerns that people have now that bail bonds are going away.

May you have a good week!

Bruce

331 (22 August 2018)

Welcome to week 331!  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 to be read in their entirety, although complete articles might be found by an Internet title search.

Please let me know if you have questions or comments.

(15 August 2018): [SR] Corona Brewer Bets $4 Billion on Cannabis StartupThe Wall Street Journal

——–“Corona brewer Constellation Brands Inc. is investing about $4 billion into Canadian marijuana grower Canopy Growth Corp., one of the biggest corporate wagers on the potential global market for cannabis-infused drinks and other products.”  Constellation CEO Rob Sands holds that cannabis is “the logical fourth leg” for the beer, wine and spirits company, given it “a total mood-modulation portfolio.”  During the last year, “three big companies—Constellation, Heineken NV and Molson Coors Brewing Co.—have announced development plans for cannabis-infused beverages.”

********The notion of the “logical fourth leg” of a “mood-modulation portfolio” is odd to read but easy to understand.  Consumers are changing how they spend their disposable income on these products and presumably more people will be purchasing marijuana-based products as they become legal in more places.  The moves of Constellation and others seems to be a way of protecting overall revenues.  This idea is developed a bit in “What Corona Owner’s $4 Billion bet on a Marijuana Firm Says About Pot’s FutureThe New York Times.  In addition, Bloomberg.com has a slew of pieces on the purchase—just go its homepage and search on Constellation.  Especially interesting is the seven-minute podcast “Constellation Brands Bets on Pot.”  It is the first segment of a 33-minute podcast.

(16 August 2018): In the Circular Economy, Products Are Designed to Be RecycledBloomberg.com

——–“Take, make, use, dispose.  For centuries, this has been the standard approach to production and consumption.  Companies take raw materials and transform them into products, which are purchased and used by consumers, who ultimately toss them out, creating waste.  Increasingly, people are starting to challenge the sustainability of this model.  Many—including the EU and the governments of China, Japan and the U.K.—argue that we should ditch this linear system in favor of a so-called circular economy of take, make, use, reuse and reuse again and again.”

********I suspect the notions discussed here a pretty familiar and intuitive.  I.e., a circular economy is a former linear economy where the waste of the LE has been fed back as a resource for further production.  As green thought-leader Bill McDonough writes, “everything is a resource for something else.”  Of course, waste will still be produced, and there are costs associated with feeding back waste into production, one of which might be reduced product quality.  Check out The Reference Shelf at the end of the article for additional information.  I was drawn to the link to the article “Circular Economy: The Concept and Its LiteratureEcological Economics. which can be downloaded.  Its Table 1 lists six limits: thermodynamics, system boundaries, economy scale, path dependency, government and management, social and cultural definition, and social and cultural definitions.

(16 August 2018):The Finance 202: Elizabeth Warren takes on corporate giants as she lays 2020 markerThe Washington Post

********Get ready to hear a multitude of references to the Accountable Capitalism Act, as put forward by Elizabeth Warren.  Recent history seems to point to an opinion piece that appeared in The Wall Street Journal on August 15th, [SR]Companies Shouldn’t Be Accountable Only to Shareholders.”  The gist of the ACA seems to be (1) the establishment of federal, rather than state, charters for corporations with annual revenue greater than $1 billion, (2) the requirement that the interests of all stakeholders, rather than just shareholders, be considered, and (3) the election of at least 40% of corporate directors by employees.  This will surely result in extensive, and no doubt unkind, discussion in the weeks to come.  There is lengthy discussion of it in “Elizabeth Warren has a plan to save capitalismVox.  In some respects the ACA expands upon the notion of a benefit corporation, i.e., “a type of for-profit corporate entity . . . that includes positive impact on society, workers, the community and the environment in addition to profit as its legally defined goals.”  There is an interesting, and somewhat surprising article in Forbes—“Sen. Elizabeth Warren, Republicans, CEOs & BlackRock’s Fink Unite Around ‘Accountable Capitalism’”—that makes that connection.

(17 August 2018):The Costs of Motherhood Are Rising, and Catching Women Off GuardThe New York Times

——–“An economic mystery of the last few decades has been why more women aren’t working.  A new paper offers one answer: Most plan to, but are increasingly caught off guard by the time and effort it takes to raise children.”  In particular, during the 1990s “Motherhood became more demanding.  Parents now spend more time and money on child care.  They feel more pressure to breast-feed, to do enriching activities with their children and to provide close supervision.  A result is that women underestimate the costs of motherhood.”  Contributing to that underestimation is the fact that the “cost of motherhood fell for most of the 20th century because of inventions like dishwashers, formula and the birth control pill” but that’s no longer the case.  “The cost of child care has increased by 65 percent since the early 1980s.  Eighty percent of women breast-feed, up from about half.  The number of hours that parents spend on child care has risen, especially for college-educated parents, for whom it has doubled.”

********The article concludes, “Generations of girls have ben told they can achieve anything they aspire to, including having both a career and children—and many women have done so.  But at the same time, both work and parenting have become more demanding.  The result is that women’s expectations seem to be outpacing the realities of public policy, workplace culture and family life.”  Given the mention of public policy, I wonder if the same behavior is being observed in European countries, especially the Nordic, where “family-friendly” policies seems to be more the norm?

********A companion article, of sorts, is “How Sexism Follows Women From the Cradle to the WorkplaceThe New York Times, which touches upon the topics raised above, and more.  This is one paper in which the invisible handshake—social and historical forces—in the form of norms, plays an especially pronounced role.  As noted in the article, “women appear to internalize social norms when they are young on issues like when to have children, what tasks are appropriate for women in the work force or even how much society values the work of women.”

(18 August 2018):Was John Maynard Keynes a liberal?The Economist

——–“In 1944 Friedrich Hayek received a letter from a guest of the Claridge Hotel in Atlantic City, New Jersey.  It congratulated the Austrian-born economist on his ‘grand’ book, ‘The Road to Serfdom’, which argued that economic planning posed an insidious threat to freedom.  ‘Morally and philosophically, I find myself’, the letter said, ‘in a deeply moved agreement.’  Hayek’s correspondent was John Maynard Keynes, on his way to the Bretton Woods conference in New Hampshire, where he would help plan the post-war economic order.”  In a 1925 essay “Am I a Liberal?” Keynes wrote “The Class war will find me on the side of the educated bourgeoisie.”  There is evidence to show that Keynes, “unlike many of his followers, was not a man of the left.”

********I wasn’t familiar with the essay “Am I a Liberal?” but you can read it at your leisure.  This brief is the third of six Philosophy Briefs on Liberal thinkers.  In my judgment, the brief provides a coherent summary of broad ideas expressed in The General Theory of Employment, Interest, and Money (1936).  The article seems to answer Keynes’s question when it is related that Keynes “belonged to a new breed of liberals who were not in thrall to laissez-faire, the idea that ‘unfettered private enterprise would promote the greatest good of the whole’.  That doctrine, Keynes believed, was never necessarily true in principle and was no longer useful in practice.  what the state should leave to individual initiative, and what it should shoulder itself, had to be decided on the merits of each case.”

(18 August 2018):The global arms trade is booming.  Buyers are spoiled for choiceThe Economist

——–Demand is growing in the global arms market, just as the number of sellers is rising.  “Above all, buyers are becoming more insistent on their right to shop around.  Although the global market for conventional weapons is dominated by the United States, “America feels strangely nervous about maintaining that role, and this year it has adopted a more aggressive sales posture.  Under a policy proclaimed in April and mapped out in more detail last month, American diplomats have been told to promote weapons sales more actively and speed up procedures for approving them.”

********Russia is the second largest seller of conventional weapons.  The arms market seems to be one in which the invisible foot—legal and political forces—play an important role.  The reason why they do, however, relates to the invisible handshake—social and historical forces.  Thus the global arms trade provides a setting ripe for analysis framed by the invisible forces.  One interesting aspect of the arms market, noted in the article, is that a “number of countries . . . have graduated from being mainly buyers of weapons and knowhow to sellers—Turkey, the Emirates and South Korea, for example.”

(20 August 2018):LinkedIn Will Allow Economics Researchers to Mine Its DataBloomberg.com

——–“Once upon a time, Facebook Inc. allowed academic researchers access to its data.  We know how that story ends: with the Cambridge Analytica scandal.  Now LinkedIn Corp., the professional social networking site owned by Microsoft Corp., says it will open its vast trove of data to academic researchers.  But this time the company . . . [is] putting controls in place to protect user privacy.”  Igor Perisic, LinkedIn’s chief data officer, said in an interview that “the company was mostly looking to advance the state of knowledge about the labor market and the economy.”  Its current initiative is called the LinkedIn Economic Graph Program.

********The Economic Graph Program sounds intriguing.  “The Economic Graph is a digital representation of the global economy based on 560 million members, 50 thousand skills, 20 million companies, 15 million open jobs, and 60 thousand schools. . . . Through mapping every member, company, job, and school, we’re able to spot trends like talent migration, hiring rates, and in-demand skills by region.”  This information helps “connect people to economic opportunity in new ways.”  The August 2018 LinkedIn Workforce Report for the U.S. provides a host of interesting information about the 20 largest U.S. metro areas.  Most interesting to me was the information about skills gaps.  It turns out that “Demand for data scientists is off the charts.”

********Given that the demand for data scientists is “off the charts,” this seems to be the place to make a brief reference to [SR] “Models Will Run the World” The Wall Street Journal.  In 2011 Marc Andreesen’s essay “Why Software is Eating the World” appeared in the WSJ and has proven to prophetic.  “Today most industry-leading companies are software companies, and not all started out as such. . . . Investors in innovative companies are now asking what comes next.”  Stephen A. Cohen and Matthew W. Granade believe that “a new, more powerful, business model has evolved from its software predecessor.  These companies structure their business processes to put continuously learning models, built on ‘closed loop’ data, at the center of what they do.  When built right, they create a reinforcing cycle.  Their products get better, allowing them to collect more data, which allows them to build better models, making their products better, and onward.  These are model-driven businesses.”

********Cohen and Granade go on to note, “A model-driven business is something beyond a data-driven business.  A data-driven business collects and analyzes data to help humans make better business decisions.  A model-driven business creates a system built around continuously improving models that define the business.  In a data-driven business, the data helps the business; in a model-driven business, the models are the business.”  I wonder if all those data scientists being demanded are geared toward data-driven businesses or model-driven businesses?

(20 August 2018):Does $60,000 make you middle-class or wealthy on Planet Earth?The Washington Post

——–“The world is on the brink of a historic milestone: By 2020, more than half of the world’s population will be ‘middle class,’ according to Brookings Institution scholar Homi Kharas.  Kharas defines the middle class as people who have enough money to cover basics needs, such as food, clothing and shelter, and still have enough left over for a few luxuries, such as fancy food, a television, a motorbike, home improvements or higher education.”  Kharas further notes that “There was almost no middle class before the Industrial Revolution began in the 1830s . . . It was just royalty and peasant.  Now we are about to have a majority middle-class world.”  That middle class now “totals about 3.7 billion people . . . or 48 percent of the world’s population.”

********The article goes on to discuss some of the considerations that went into defining the global middle class, which depends, among other things, on family size, household income, and (of course) relevant prices.  What really caught my attention was the Dollar Street project of Sweden’s nonprofit Gapminder foundation, which has “photographed the daily lives of more than 250 families around the world. . . . The photos show the people and their homes, eating utensils, toilets, toothbrushes and transportation, allowing people to compare lifestyles around the world.”  As noted at the Dollar Street site, they visited “264 families in 50 countries, and collected 30,000 photos.”  At the site, there is the opportunity to sort by region, country, and family characteristics.  If you want a glimpse of what other people have, want, and value around the world, this is a great way to do it.

********All this reminded me of Hans Rosling’s stupendous 2006 Ted Talk, in which he brought dynamic bubble graphs to public attention.  You will need 20 minutes to watch the entire video, but it was well worth rewatching for me.  Rosling, who passed away in 2017, is funny and genuinely enthusiastic about his work.  (Watch 3 minutes to get the humor, 5 minutes to get the enthusiasm.)  You can create your own dynamic bubble graphs easily with one of Gapminder’s tools.

********I have been resensitized to Rosling’s work because of the recent publication of Factfulness: Ten Reasons We’re Wrong About the World—and Why Things Are Better Than You Think, by Hans Rosling with Ola Rosling and Anna Rosling Rönnlund, which appeared on the long list for the Financial Times and McKinsey Business Book of the Year.  There is a nice six-minute video summarizing some elements of the book at Gapminder.

(20 August 2018): “8 Fast-Food Chains Will End ‘No-Poach’ Policies” The New York Times

——–“Eight more restaurant chains have agreed to end a policy that blocks workers from switching jobs within the individual brands, becoming the latest companies to curtail a once-prevalent hiring practice that critics say depressed wages for some of America’s lowest-paid employees. . . . Such restrictions are not unique to the restaurant industry, but until recently they were ubiquitous, particularly among fast-food chains.  That began to change last year, after two prominent economists at Princeton produced a report that focused on how no-poach clauses could lock workers into low-wage jobs.”­

********You can learn more about the work of the Princeton economists—Alan Krueger and Orley Ashenfelter—in an earlier NYT article.  Although these agreements were reached with the attorney general of the state of Washington, the agreements “will affect the companies’ operations nationwide.”  I thought it was noteworthy that a distinction was made between noncompete clauses and no-­poach restrictions.  Employees are made aware of noncompete clauses, but “people who work for fast-food companies might have no idea that they are limited in where they may work.  No-poach restrictions are buried in thick contracts between corporate headquarters and franchisees.”

May you have a good week!

Bruce

330 (15 August 2018)

Welcome to week 330!  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 to be read in their entirety, although complete articles might be found by an Internet title search.

Please let me know if you have questions or comments.

(8 August 2018): Why ‘Fred’ Is the Best Friend of Economics WritersThe New York Times

********This article is an interview of sorts, by Neil Irwin, who is an economics writer for the NYT, with himself.  It largely consists of a discussion of some of the tried-and-true tools that he uses as a reporter.  He tends to use single-purpose devices rather than “Swiss Army Knives” and chooses to stay back from the technological frontier, preferring to let others to find tools that work well (and don’t).  That is the first part of the article.  The second part, which is what shows up in the title, is ’Fred’, which stands for Federal Reserve Economic Data, which is maintained by the Federal Reserve Bank of St. Louis.  As he notes, Fred “allows you to use a single interface to pull, at last count, 509,000 different data series from 87 different sources of economic and financial data.  A big part of the advantage is simply that once you’re familiar with the interface, which is intuitive, you don’t have to relearn the data retrieval tool for each statistical agency every time.”  Irwin goes on to write, “I generally use Microsoft Excel for data analysis, which is powerful enough to do most of the stuff I know how to do on my own.”  Otherwise, he brings in a colleague to deal with more sophisticated work.

(10 August 2018): In Times of Trade War, Companies Get Creative to Avoid TariffsBloomberg.com

——–“Facing the barrage of President Donald Trump’s tariffs, Steve Katz is ducking for cover in the trade-war version of a demilitarized zone.  Katz manages a plant at United Chemi-Con in Lansing, North Carolina, a village of about 150 people . . . The facility . . . is covered by a foreign-trade zone based in Greensboro.  Trade zones are areas in or near ports of entry under U.S. Customs and Border Protection supervision that are generally considered outside of CBP territory.  With the blessing of the U.S. government, companies can import goods into the zone with reduced duties on a case-by-case basis. . . . To avoid U.S. tariffs on imported aluminum from Japan, Katz secured U.S. Customs approval to alter the activated area of the trade zone to include a shipping dock for exports.  The company is also hoping to designate a new trade zone around its warehouse in California to avoid tariffs on Chinese imports sent outside the U.S.”  Katz estimates that it cost the firm about $20,000 to alter the activated trade zone in North Carolina.

********As the article notes, this is a form of “tariff engineering” that is making a comeback as the U.S. moves away from the trade liberalization that has been underway almost continuously since the Reagan administration.  A three-page note provides additional information about the history and methods of tariff engineering.

(11 August 2018):De Tocqueville and the French exceptionThe Economist

********This is the second of six Philosophy Briefs on liberalism’s greatest thinkers.  Tocqueville is almost universally known for Democracy in America (1835-40) but The Old Regime and the French Revolution (1856) is also essential for understanding this “most unusual member of the liberal pantheon”—a proud member of the French aristocracy.  Tocqueville “believed that liberal optimism needs to be served with a side-order of pessimism.  Far from being automatic, progress depends on wise government and sensible policy.”  John Stuart Mill, in his Autobiography, “thanked Tocqueville for sharpening his insight that government by the majority might hinder idiosyncratic intellectuals.”  Thus Mill’s notion of the “tyranny of the majority” seems to owe a good deal to Tocqueville.

(12 August 2018):Business Book of the Year 2018—the longlistThe Financial Times

——–“The ups and downs of capitalism—past, present and future—are addressed by many of the books in contention for this year’s Financial Times and McKinsey Business Book of the Year Award.  The 15 titles on the longlist for the £30,000 prize include the forthcoming Capitalism in America, a sweeping and entertaining history of US economics and business by Alan Greenspan, former chairman of the US Federal Reserve, and Adrian Wooldridge [of The Economist]. . . . The award, now in its 14th year, will go to the ‘most compelling and enjoyable’ business book from the list.  Judges will select up to six finalists and announce the shortlist on September 14. . . . Last year’s prize went to Amy Goldstein for Janesville, her deeply reported book about the impact on a Wisconsin community after the closure of a General Motors assembly plant.”

********The article includes images and blurbs for each of the 15 finalists.  In some ways I am most curious about Bad Blood: Secrets and Lies in a Silicon Valley Startup, “John Carreyrou’s tale of the rise and fall of Theranos, the blood-testing  firm founded by Elizabeth Holmes.”  Many, many really smart and respected people were taken in by Theranos and it would be useful to know how this came to pass.  Adam Tooze’s book Crashed, an “exhaustive 700-page analysis of the global financial crisis, a decade on” also makes the list.  Tooze points out that “the crisis laid the ground for the populist backlash obvious in the 2016 vote for Brexit in the UK and the election of Donald Trump in the US.”  One might add, I suspect, the rise of the right in much of the EU.

(12 August 2018):Americans Own Less Stuff, and That’s Reason to Be NervousBloomberg.com

——–[Bloomberg Opinion by economist Tyler Cowen of George Mason University.]  “Some social problems are blatantly obvious in daily life, while others are longer-term, more corrosive and perhaps mostly invisible.  Lately I’ve been worrying about a problem of the latter kind: the erosion of personal ownership and what that will mean for our loyalties to traditional American concepts of capitalism and private property.  The main culprits for the change are software and the internet.  For instance, Amazon’s Kindle and other methods of online reading have revolutionized how Americans consume text.  Fifteen years ago, people typically owned the books and magazines they were reading.  Much less so now. . . . The change in our relationship with physical objects does not stop there.  We used to buy DVDs or video cassettes; now viewers stream movies or TV shows with Netflix. . . . Music lovers used to buy compact discs; now Spotify and YouTube are more commonly used to hear our favorite tunes.”    Then there are cars.  “The great American teenage dream used to be to own your own car.  That is dwindling in favor of urban living, greater reliance on mass transit, cycling, walking and, of course, ride-sharing services such as Uber and Lyft.”

********Cowen goes on to note, “Each of these changes is beneficial, yet I worry that Americans are, slowly but surely, losing their connection to the idea of private ownership. . . . We’re hardly at a  point where American property has been abolished, but I am still nervous that we are finding ownership to be so inconvenient.”  It seems like Cowen is expressing a thought that is somewhat akin to a change in the invisible handshake—social and historical forces that influence human behavior—that is driven by a change in the invisible hand—economic forces that influence human behavior.

********I’m not sure that the change Cowen notices, which is certainly real, is something to be concerned about, but it is interesting to think about.  What he describes is largely a change from purchasing goods—tangible things that give off services—to purchasing services.  If you buy a good, you are also buying a sequence—perhaps very long—of potential services, much more perhaps than you really want.  (Will I ever again watch the DVDs of the Danish TV series “Forbrydelsen” that I own?)  All this, I suppose, is just another example of the “Rent vs Buy” decision encountered in textbooks on finance.  Ownership can certainly be a burden.  When you buy a good, it is generally your problem when something goes wrong, but when you rent a good (buy  a service), it is generally the problem of the rental and something goes wrong, it s the problem of the rentor when something goes wrong.  In short, “he” who owns the good, owns the problem.  What do you think, are you concerned about people moving to purchase fewer goods and more services on the whole?

********Ride sharing services Uber and Lyft have a position on the supply side of the market for auto-based transportation services.  So the article “Uber and the False Hopes of the Sharing EconomyThe New York Times, is of related interest.  As it turns out, in New York City, approximately 80 percent of Uber drivers “bought cars for the purpose of making a living by driving.”  So, in the future, especially in urban areas, fewer cars may be purchased but they will be used more intensively, ceteris paribus.  But what is the optimum number of such service providers in, say, NYC?  It depends upon what problem you are trying to solve.  Learn more by reading “What’s the Right Number of Taxis (or Uber or Lyft Cars) in a City?The New York Times.

May you have a good week!

Bruce

329 (8 August 2018)

Welcome to week 329!  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 to be read in their entirety, although complete articles might be found by an Internet title search.

Please let me know if you have questions or comments.

(4 November 2017): Why builders of big L.A. projects are making concrete with gravel and sand shipped from CanadaThe Los Angeles Times

——–“The 519 miles of L.A.’s freeway system.  Dodger Stadium.  City Hall.  All built with concrete filled with rock and sand washed down from Southern California’s iconic mountain ranges.”  Those materials are still abundant in the area.  “But now, as another building boom rumbles across Los Angeles and a new generation of high-rises climbs skyward, the rock and sand are coming from a much more distant source: Canada’s Vancouver Island, more than 1,400 miles away.”  Nonetheless, “thanks to a combination of materials science, cheap ocean shipping and, some argue, NIMBYism, today’s industrial concrete mixers are often filled with imported rock and sand.”  Regarding the cost, consider that “To ship 1 ton of rock over 1,450 miles of ocean to Long Beach costs about $7.25.  To truck it from Long Beach to downtown L.A., about 25 miles, adds an additional $8.75.  And at $16 combined, that’s less than the $22.75 it might cost to truck a ton of aggregate on the 65-mile trip from a quarry in Palmdale to downtown.”

********I stumbled upon this article while signing up to follow the Twitter account of James Rufus Koren, a reporter for the LA Times.  What was news for me, and what made it relevant, here, is the fact that the quality of the concrete used in construction depends upon the nature of the sand, gravel, water, and cement used in its production.  As project manager Todd Lamberty noted, “If you’re laying down a sidewalk, you can use whatever aggregate you want.  But to make high-performance concrete, the materials matter.  Use lower-quality sand and gravel and you’ll need to add a larger amount of cement. . . . The aggregate that’s locally mined is pretty poor quality in terms of its shear strength . . . You end up putting a ton of cement in the mix to make up for that, and cement is the most expensive component.”  So, in the background, there is what microeconomists call a cost-minimization problem for given product quality involved in construction.  The proper mix of materials depends upon their relative prices.  An interesting case in point is that Qatar and Kuwait “were among the top global importers of sand and gravel in 2015 . . . There’s plenty of sand in both Persian Gulf nations, but of the wrong sort.  Desert sand, formed by wind, is too smooth for making concrete.  Coarser sand formed by rivers and glaciers is preferred.”

(31 July 2018): Patrón Made Tequila Top-Shelf.  Will Bacardi Dilute It?Bloomberg Businessweek

********An engaging article about entrepreneurship in the context of the market for tequila, telling a part of the story of how Patrón came to be the watch word for tequila excellence.  The title indicates the concern that Bacardi Ltd., which purchased “the 70 percent of Patron Spirits International AG that it didn’t already own for $5.1 billion in January,” might erode product quality by introducing a different production process. If you like mules, you will want to check out the photos.

(1 August 2018): Oil Tanker Owners Are Scrapping the Most Ships in DecadesBloomberg.com

——–“Oil tanker owners are giving up.  A 19-month curtailment of OPEC cargoes, and environmental regulations that are proving uneconomical to comply with, have got owners purging the supertanker fleet at the fastest pace since the 1980s . . . While the demolition surge—sending vessels to be ripped apart on the beaches of India and Bangladesh—reflects the worst charter rates for owners in decades, scrapping often helps set the stage for market recoveries.  Morgan Stanly estimates that the global fleet of so-called very large crude carriers [VLCCs] could lack 100 million barrels of transportation capacity by late 2020.”

********This article provides a nice example of how various markets interact when one or more of them has a highly durable good.  Here there is the market for VLCCs, the market for VLCC services, i.e., the leasing of VLCCs, and the market for the steel from broken down vessels.  It is clear from the coverage that those in the related industries are aware of the cyclical nature of them, and how decisions to scrap today or not, has consequences for the market for new VLCCs at a later time.  The element of increased cost due to regulatory change brings in another interesting element.

(1 August 2018): [SR]America’s Long Love Affair With Beer Is on the RocksThe Wall Street Journal

——–“U.S. drinkers, particularly young ones, are having relationship problems with the national beverage [beer].  It’s no longer true they start out favoring mild pilsners and low-calorie beers, then graduate to harder stuff later in life, if at all.  Now they are thinking about other things: taste, value, beer bellies. . . . According to the Beer Institute, a trade group, drinkers chose beer just 49.7% of the time last year, down from 60.8% in the mid-‘90s.  Among 21- to 27-year-olds, the decline has been sharper.  Anheuser-Busch InBev SA, Budweiser’s owner, found that in 2016, just 43% of alcohol consumed by young drinkers was beer.  In 2006, it was 65%.”  As further evidence of decline, per capita beer consumption “in the U.S. fell to 73.4 liters last year, from 80.2 in 2010 and 83.2 liters in 2000.”  To compensate for the decline in volume, the beer industry has been “increasing prices.  That has helped make whiskey and wine relatively more affordable.  Beer prices rose 42% between 2000 and 2017, compared with 11% for wine and 19% for spirits, according to a Brewers Association analysis of data from the Bureau of Labor Statistics.”

********It seems, then, that changing tastes and changing relative prices have contributed to declining sales volume of beer in the U.S.  What might be called “Big Beer” has suffered the largest declines, with the craft beer segment still growing, although that growth rate has slowed in recent years.  (Large growth rates can never persist.)  Budweiser is experimenting with a variety of new types of beers, which seem like a mashup of beer and spirits, e.g., “a new Budweiser beer, aged with bourbon-barrel staves.”  Taking another approach, Molson Coors “is turning to cannabis drinks in search of growth . . . The company said it is forming a joint venture with the Hydropothecary Corp., a Canadian cannabis producer, to develop non-alcoholic, cannabis-infused beverages for the Canadian market.”  You can learn more about this in [SR]Molson Coors Turns to Marijuana as Beer Sales DropThe Wall Street Journal.  On a somewhat related matter, check out “Wrigley Billionaire Moves From Chewing Gum to Medical MarijuanaBloomberg.com.  Evidently those with experience in the marketing of traditional products like beer and gum see an opportunity to transfer their skills into the development of new products that connect with marijuana.  As the article notes, “the transition of billions of dollars into the legal U.S. economy from the black market is drawing a lot interest from investors.”

(4 August 2018):Specter of America’s Growing Fiscal Deficit and Debt Load LoomsBloomberg.com

——–“America’s worsening fiscal outlook and mounting government debt are hiding in plain sight, but that troubling mix may not get a pass from investors for much longer.  President Donald Trump’s tax cuts and new federal spending have fueled a budget deficit that the Congressional Budget Office predicts will reach $1 trillion in 2020.  With the Federal Reserve also winding down its debt holdings, that’s  forced Treasury Secretary Steven Mnuchin to lift note and bond sales to levels last seen in the aftermath of the recession that ended in 2009.”  Harvard University’s Martin Feldstein, who was a top economic aide for President Reagan has noted, “We are heading to $1 trillion annual deficits and therefore $1 trillion annual borrowing . . . That will push up long-term interest rates.  That could depress the equity prices that are already very much overvalued.”  Economist Jeffrey Frankel, also of Harvard University, adds: “We are currently experiencing the most radical pro-cyclical polity outside of war-time, perhaps ever . . . This is an especially bad time to raise the budget deficit not just because of business cycle timing, but also because of the demographic timing: the ongoing retirement of the baby boom generation means huge deficits in Social Security and Medicare are coming.”

********The size of the federal deficit should be a story of continuing importance over the next few years.  Running huge deficits at full employment can only make one wonder how the current administration would manage a mild recession, much less something like the Great Recession.  This question is raised in the context of a review of Crashed: How a Decade of Financial Crises Changed the World in The Economist.  The author of the book, historian Adam Tooze, “takes on the financial and economic history of the last decade in a monumental tome of nearly 700 pages.”  In doing so he develops four big themes: immediate response to the crisis of 2008, the euro-zone crisis, the shift in the developed world to more austere fiscal policy, and populist politics in Europe and America.  The changing mood, especially in the U.S., “raises fears about what will happen when another storm hits the world economy.  The level of co-operation that occurred in 2008 and 2009, such as when America’s central bank made dollars available to its cash-strapped European counterparts, may not be easy to achieve next time around.”

(4 August 2018):John Stuart Mill: Against the tyranny of the majorityThe Economist

********This is the first of six Philosophy Briefs on liberalism’s greatest thinkers.  (The introduction to the series appears is one of the leaders for the issue.)  Like most great thinkers, his ideas were multifaceted and not always appealing.  A writer on scientific method, political economy, ethics, and political philosophy, his most famous book is On Liberty.  In it he stated the “harm principle,” i.e., “the only purpose for which power can be rightfully exercised over any member of a civilized community, against his will, is to prevent harm to others.”

(5 August 2018):Need a loan?  Forget the corner payday lender—your boss has you coveredThe Los Angeles Times

——–“Your employer might contribute to your retirement account or help pay for health insurance.  But will it help you set up an emergency fund?  Or offer you a loan of a few thousand dollars when your transmission breaks downs?  If you work for Comcast Corp., yes. . . . Founded this year by Comcast’s venture-capital arm, benefits firm Brightside announced last month that it would offer loans through San Diego firm Employee Loan Solutions.  The loans of $1,000 to $2,000 will be available to most employees, do not require a credit check and are paid back through payroll deductions.  With an interest rate of 24.9%, the loans are more expensive than the typical credit card but are dramatically cheaper than other types of debt available to borrowers with bad credit or little credit history.  Payday loans in California, for instance, come with annual interest rates topping 400%.”  This is an example of so-called “financial wellness benefits” that are becoming “increasingly common parts of corporate benefits packages.”  The loan program offered by Employee Loan Solutions, “called TrueConnect, is already offered through nearly 1,000 employers, many of them public agencies.”

********As the article notes, 24.9% interest on a loan is enormous, but pales in comparison to payday loans with annual percentage rates in the hundreds.  Thus these employer loans are occupying a space between credit card rates and payday loans for those in financial trouble.  Why are the rates so much lower than those for payday loans?  Presumably the costs of origination and collection are much less.  It has helped, too, that employers have become aware that their workers are among those who have been borrowing at high payday rates.

********You can learn more about Employee Loan Solutions from the 2016 article “Offer payday loans as an employee benefit, this start-up saysLos Angeles Times.  What I noticed is that these loans, too, are called payday loans, which is sure to lead to confusion.  Some terminology to differentiate between conventional payday loans and those that originate through an employer seems desirable.

(5 August 2018):Steel Giants With Ties to Trump Officials Block Tariff Relief for Hundreds of FirmsThe New York Times

——–The imposition of “25 percent tariffs on steel and 10 percent on aluminum” has led the Trump administration to “establish a process for companies to request ‘exclusions’ for any product they could not otherwise buy in the United States . . . But the Commerce Department, which is overseeing the process, also allowed American companies to argue against an exclusion request. . . . Since May, companies have filed more than 20,000 requests for steel tariff exemptions.  As of the end of July, the Commerce Department had denied 639 requests.  Half of those denials came in cases where United States Steel, Nucor or a third large steel maker, AK Steel Holding Corporation, filed and objection . . . Department officials said on Friday that they have not granted a single steel exclusion request that drew an objection.”  Critics of the exclusion process have said that it has “overwhelmed Commerce Department staff members, who do not have the resources to sift through thousands of complicated requests and objections and judge them on their merits.  They say the default position is to simply listen to a company that objects, regardless of whether the objection is legitimate.”

********This is a clear example of how the imposition of tariffs move an element of decision making from market participants to a government bureaucracy.  As a result, there is a little bit less invisible hand and a little bit more invisible foot affecting prices and quantities.  An editorial in The Wall Street Journal expands on these thoughts: [SR]Trump’s Political Tariff Bureaucracy.”  For an ironic twist on the tariff story, read “Alcoa Requests Reprieve From Trump’s Aluminum TariffsThe New York Times.  It turns out that Alcoa “imports much of its aluminum from its facilities in Canada, which is among the countries subject to Mr. Trump’s metals tariffs.”

********Another tariff story that caught my attention this week pertains to dried beans: [SR] “Kidney Beans Piled to the Rafters: Tariffs Are Biting in Farm Country” The Wall Street Journal.  The story originates from Menomonie, Wisconsin.  It tells the story of how Chippewa Valley Bean Co., whose president is Cindy Brown, has been affected by the EU response to the steel and aluminum tariffs imposed earlier this year.  As a result of the tariffs, “Cindy Brown is running out of room to store . . . beans.  One-ton bags of them cover the floors in her cavernous warehouses. . . . Chippewa Valley Bean Co. had been on track to ship to Europe 60% of its beans traded internationally this year, worth $25 million.  Now, ‘we’re just sitting on our hands’ . . . Businesses reliant on a single product are especially exposed.  Focusing on a specialty crop . . . paid off for Chippewas Valley for years . . . Now, specialization is magnifying the tariff pain . . . Ms. Brown . . . said the company last month shipped nearly 40% less than what is typical for this time of year.”  It is not known what benefit, if any, processors like Chippewa Valley will receive from the Trump administration’s promised $12 billion of emergency aid to support producers of agricultural commodities.  There is a nice four-minute video interview with Cindy Brown on CNBC.  She makes her position very clear when, toward the end of her interview, she calls for “Trade not aid.”

May you have a good week!

Bruce