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

342 (7 November 2018)

Welcome to week 342!  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.

(29 October 2018):Life, Death And The Lazarus Drug: Confronting America’s Opioid CrisisNPR.com

********This is a 49-minute podcast with “Hidden Brain” reporter Shankar Vedantam.  The broad topic is the opioid crisis, but it is especially focused on Narcan, the so-called “Lazarus Drug” in the podcast title.  An essential point made early in the podcast deals with the problem of moral hazard, i.e., the notion that taking steps to mitigate the consequences of certain behavior is likely to bring about more of that behavior.  For example, the ability to insure one’s home against hurricane damage or floods may lead more people to build more homes where hurricane damage is likely or where flooding is probable.  In this particular case, moral hazard manifests with the existence of Narcan.  Since it is very effective in saving lives from opioid overdoses, will more people engage in opioid use if it is available?  Unsurprisingly, some economists and people working in addictions have differing views, and the discussion is worth a listen.  There are four Additional Readings at the link that provide much more information.

********The modern source from which stems economic writings on moral hazard is Sam Peltzman, “The Effects of Automobile Safety Regulation,” Journal of Political Economy, 83,4 (August 1975): 677-726.  Oddly, Peltzman’s name does not appear in the Wikipedia article on moral hazard.

(31 October 2018):  “Why do we have a 30-year mortgage, anyway?Marketplace

********This five-minute podcast explores the origin of the 30-year mortgage.  As one interviewee notes, the 30-year mortgage “did not come down engraved in a tablet” but was the outcome of historical processes growing out of the Great Depression, with the administration of FDR playing a central role.  In the 1920s, mortgages were typically 3-5-year interest-only loans with a variable interest rate, i.e., in repaying the mortgage, one made interest payments for 3-5 years, after which the entire loan was repaid (the so-called “balloon” payment).  Most people, though, simply went out and got another loan.  (This reminds me of payday loans.)  With the advent of the Great Depression, opportunities for refinancing disappeared, and new loan mechanisms needed development.  And they were.  Cornell historian Louis Hyman was interviewed for this story and he is the author of a 2011 book that looks like essential reading on the subject, as well as consumer debt generally: Debtor Nation: This History of America in Red Ink.

********Debtor Nation appears to be a revision of a highly-decorated doctoral dissertation at Harvard.  According to an Amazon reviewer, “Hyman was awarded the prize for best dissertation in history at Harvard and best dissertation in business history nationally for his effort” (from Amazon review).  A more popular version of the book seems to be the 2012  Borrow: The American Way of Debt.  While we are discussing Hyman’s oeuvre, his most recent (2018) book is Temp: How American Work, American Business, and the American Dream Became Temporary.  Hyman seems to be able to bring history to bear on essential issues of our times.

(2 November 2018):Where ‘Yes! To Affordable Groceries’ Really Means No to a Soda TaxThe New York Times

——–“In the run-up to Election Day, residents of Washington and Oregon have been bombarded” with ads from “groups with names like Yes! To Affordable Groceries.  The organizations have spent more than $25 million on commercials that feature plain-spoken farmers and penny-pinching moms urging support of ballot measures that would prohibit municipalities from taxing food sales.  But what most voters don’t know is that Coca-Cola, PepsiCo and other American beverage companies are largely financing the initiatives—not to block taxes on stables like milk and vegetables but to choke off a growing movement to tax sugary drinks.”

********As the article points out, soft drink companies have devised a strategy that avoids explicit mention of soda taxes, thereby protecting them from arguments of special pleading.  Historically, “The strategy of pushing pre-emptive laws and ballot measures was pioneered four decades ago by the tobacco industry and the National Rifle Association as a way to stop localities from passing antismoking ordinances or limitations on gun ownership.”  In so doing the N.R.A. “has been wildly successful.”  That is, pre-emption can work.

********So here are the results.  In Washington, I-1634 is on track to be approved by the voters, thereby prohibiting the enactment of “new food and beverage taxes” but not reversing Seattle’s existing “1.75-cents-per-ounce sweetened beverage tax.”  In Oregon, a similar ballot item to change the state constitution, Measure 103, was soundly rejected, “failing 57 percent to 43 percent.”  The item would have prohibited “taxes on the ‘sales or distribution’ of food and nonalcoholic beverages.  Early in 2018, California’s state legislature passed legislation, subsequently signed by Governor Jerry Brown, to prohibit “California cities and counties” from taking soda “for the next 12 years.”  .”  I’m sure that soda companies and others will be carefully studying these outcomes as they prepare for future political action.

(5 November 2018):We’re All Climate Catastrophe Preppers NowBloomberg.com

********This is quick jaunt through some of the economic and financial issues connected to climate change.  Most of these will be familiar, some probably not.  One thing that seems sure to happen is slower economic growth: “Humans are far less productive at high temperatures.”  And physical capital may grow more slowly, too, due to storm damage and increased costs of “rebuilding and damage-prevention efforts.”  The author concludes the article noting “If fears of material financial loss for ourselves and our children can’t motivate us to change our ways, then perhaps nothing will.  In the meantime, assume asset returns will be lower than they might otherwise have been and try to put aside more money today.  We are all preppers now.”

********One item that I found interesting to look at is the University of Notre Dame’s rankings in relation of climate vulnerability.  There are three: an overall GAIN index, a Vulnerability index, and a Readiness index.  You can see all three here.  No great surprises—there seems to be an inverse relationship between economic development and vulnerability, and a direct relationship between economic development and readiness.

May you have a good week!

Bruce

341 (31 October 2018)

Welcome to week 341!  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.

(27 October 2018):Do We Have to Tell Them the House Is Haunted?JSTOR Daily

********Since TIF Weekly is being distributed and posted on Halloween, Jit seems appropriate to lead with this piece.

——–Houses believed to be haunted “generally fall under stigmatized property laws.  These laws cover homes where notorious crimes, violent murders, or suicides have occurred.”  According to real estate law scholar George Lefcoe, there has been a shift since the 1960s in the U.S. from “caveat emptor, or ‘buyer beware,’ to the principle that problems with a house should be disclosed to interested buyers. . . . Disclosure laws vary from state to state.  ‘Hauntedness’ isn’t considered a material fact in all of them.”  California’s Civil Code, though, “mandates that realtors tell buyers if a violent death occurred three years before a purchase offer.”  Randall Bell, a California realtor, notes that “stigmatized property can sell for 10% to 25% less than a non-stigmatized one.”  He goes on to say that “perception is everything with stigmatized properties.”  That is why, “when he consults on places where there are rumors of cultic murders or satanic rites, he effectively treats them as if they’re real.”

********Here, again, is an instance of the Thomas theorem: “If men define situations as real, they are real in their consequences.”  The article goes on to discuss a 1989 case in Nyack, N.Y. in which a buyer wanted to be released from a contract as “the realtor hadn’t disclosed the house’s reputation for being haunted”—he was—and a bit of disclosure law history: “Disclosure laws for haunted houses date back thousands of years.”  You may be interested to know that the “oldest surviving haunted house story in Greek and Roman literature is the Mostellaria, or ‘The Haunted House,’ by the Roman comic playwright Plautus” and was likely “first performed between 200 and 194 BCE.”  You can learn more about Mostellaria in its Wikipedia article and you can read the play in The Rope and Other Plays.

(25 October 2018):For many grocery stores and pharmacies offering the flu shot is just a way to get you in the doorMarketplace

——–[Reported by Alexandra Olgin from Charlotte, North Carolina.]  “Before getting the flu vaccine this year, I did some research.  At a nearby CVS and Walgreens I could get a discount of $5 or $10 if I spent a certain amount. . . . I ended up going to a Publix store . . . where the company advertised a $10 . . . gift card for the shot. . . . Publix wouldn’t tell me how much of an increase it has seen in customers coming in for shots since it started offering the promotion.”  But the pharmacist who gave the shot said “We’ve been super busy this year, especially with the flu shot promotion we’re doing. . . . It’s kind of a nice way to get foot in the door with people so we can kind of get other immunizations, identify gaps in care for people.”  Burt Flickinger of Strategic Resource Group says that “Prescription loyalty is the greatest loyalty in all of retail.”  He notes that grocery stores offering flu shots could “cut into the big retail pharmacy market . . . ‘This is the perfect opportunity for the food and drug combo retailers to competitively capitalize.”  Pharmacy chains, on the other hand, “look at the flu shot as a gateway to becoming primary care centers, the places where people come for minor illnesses like . . . ear infections or colds.”

********Remember Theranos and Bad Blood?  One of its biggest clients was California-based Safeway Inc., whose CEO wanted to incorporate primary care centers into its grocery stores with the blood testing services of Theranos as a centerpiece.  The point is that grocery stores that run on thin profit margins are on the lookout for products and services that will expand their customer offerings and make profit margins fatter.  Presumably pharmacies are also looking to primary care services, like shots, for the same reason.

(25 October 2018): [SR]A Big Reason U.S. Economy Is Accelerating: Government SpendingThe Wall Street Journal

——–”A stark pickup in government spending, particularly in defense, has helped fuel a broad acceleration in U.S. economic growth in the past year and a half, according to a Wall Street Journal analysis of Commerce Department data.  The U.S. economy has expanded at a 2.9% annual rate since April of 2017, according to the Commerce Department’s tabulations of the nation’s gross domestic product, or output.  That growth rate is faster than the 2.2% annual growth rate between mid-2009—when the expansion started—and April 2017.  Faster government spending accounted for nearly half of the acceleration.”  According to the Commerce Department, defense spending “shifted from contracting at a 2.1% annual rate between 2009 and March 2017, to growing at a 2.9% rate since April 2017.  The turnaround added 0.21 percentage points on average to the nation’s overall economic growth rate . . . When including faster spending on nondefense items and spending at the state and local levels, increased government spending accounted for 0.34 percentage point of the 0.7 percent point increase in the growth rate since April 2017, or nearly half.”

********This is one of those instances where it would be nice to look at the reports and data used by the WSJ in its analysis, but there were no citations of such materials.  No one will be surprised that increased government spending and lower tax rates, especially at the federal level, will increase GDP.  But then there is the issue of the federal deficit and the federal debt.  This is not a small matter, as indicated in “Mnuchin Set to Top Geithner’s Record as Treasury Auctions GrowBloomberg.com.

(26 October 2018):This AI Startup Generates Legal Paper Without Lawyers, and Suggests a RulingBlomberg Businessweek

——–Ignacio Raffa is the creator of Prometea, artificial intelligence software that was trained using “300,000 scanned court documents from 2016 and 2017, including 2,000 rulings.”  Based in Buenos Aires, Prometea can, in seconds generate a draft ruling . . . that carries the letterhead of the Buenos Aires district attorney’s office and all the proper fonts and jargon, with no lawyers or paralegals involved.”  This is a boon as, “In Argentina, Das write the decisions and the cases’ presiding judges either reject them and write their own, or simply approve them.  Prometea is being used for stuff like taxi license disputes, not murder trials, but it’s a significant automation of the city’s justice system.”  What used to take 15 lawyers six months to clear can now be done is six weeks.  The documents created by Prometea have met with success.  “So far, judges have approved 33 or its 33 suggested rulings, and it’s being used in at least 84 other pending cases.”

********As the article notes, the app developed by Prometea can “redirect staffers away from legal scut work and toward more complex cases.”  What this article has brought to my mind is how different legal systems are, certainly among nations, but among states (and municipalities), too.  The invisible foot manifests in different ways in different places.

(27 October 2018): [SR]Chinese Firms Snap Up U.S. Sites to Process ScrapThe Wall Street Journal

——–“Chinese companies are setting up shop in the U.S. to obtain the scrap paper and plastic their government has deemed too dirty to import.  U.S. shipments to China of old cardboard, newspaper and discarded plastic slowed after China this year implemented more stringent standards on the purity of imported scrap.  That change has left Chinese packaging companies and plastics manufacturers short on materials.  Some of them are buying or building plants in the U.S. to manufacture the paper for corrugated boxes, pulp and plastic pellets for which they can’t find enough raw material in China.  Companies including some of China’s biggest paper makers are discovering a glut of cheap recycled material in the U.S.”

********In brief, China’s imposition of higher quality standards for U.S. scrap paper and plastic has led to additional processing of that scrap in the U.S. before exporting it to China, some of that additional processing being carried out by Chinese firms, whether established or newly formed.  This seems like a predictable consequence of the Chinese intervention.

********Further processing of items like scrap plastic before exporting it to China is one way of addressing the surfeit of scrap.  Another is to employ that scrap in the U.S., for example, in roads.  That is the message of “Where does your recycled plastic go?  Perhaps into future highways.” The Washington Post.  Much research is underway to identify methods by which recycled plastic can be incorporated into roads.  So far, “companies in the United States and abroad have embrace research into three types of roadway plastics: adding refined plastic pellets to hot-mix asphalt, grinding off the top surface of roads and adding urethane, and roads that essentially are nothing but recycled plastic.”  Roads infused with plastic last longer and potholes fixed with plastic-based materials seem to be fixed once and for all.  Roads made with plastic, however, tend to be slippery and require a special coating to make it less slippery.

(28 October 2018): [SR]Tariffs May Crown Corn King AgainThe Wall Street Journal

——–“American farmers hit by the U.S.-China trade battle are preparing to reshape the U.S. Farm Belt by planting more corn and less soybeans next year over a land mass potentially equal to the size of Connecticut. . . . U.S. farmers in 2018 planted more soybeans than corn for the first time in more than three decades, betting on that demand.  But Chinese tariffs on U.S. soybeans have hurt that bet: U.S. exporters have sold less soybeans to China, typically the largest foreign buyer of the crop, in the past seven weeks than in a single week last fall.”  Prices and profitability are driving these changes.  As Minnesota farmer Joe Schreurs notes, “You’re not going to raise a crop that you lose $2 a bushel on every year.”  Schreurs is considering “switching up to 30% of his soybean acres into corn next year if Chinese duties remain in place and federal assistance dries up.”  Still, “corn may not be a panacea, especially for farmers who have racked up debts. . . . Some farmers anticipate bankers will have a bigger say in planting decisions this year, scrutinizing a farm’s finances before offering loans.”

********The article goes on to discuss a variety of ways that different sellers of goods are being affected by the tariffs.  I was struck by the notion that the tariffs may lead to an increased say of banks in the planting decisions of farmers.  This relative loss of decision-making autonomy is one of those things, I am certain, that few people think of when considering tariff impacts.

(28 October 2018):Capitalism besiegedThe Washington Post

********This piece, by columnist Robert Samuelson, is a review, of sorts, of Capitalism in America: A History, by Alan Greenspan, the long-serving (former) chairman of the Federal Reserve, and Adrian Wooldridge, an editor at The Economist.  The authors hold that “What explains America’s success at creating prosperity . . . is society’s willingness to accept change.”  They note that “The central mechanism of the progress has been creative destruction,” the well-known phrase “coined by economist Joseph Schumpeter.”  But the willingness to accept that change has lessened.  “As a result, the sanctity of American capitalism is now questioned more than at any time since World War II.”  A good example of such questioning is provided by Can American Capitalism Survive?, by Steven Pearlstein, a colleague of Samuelson at The Washington Post.  A précis, of the book seems to be provided by Pearlstein’s article “Five myths about capitalism.”  In commenting about Pearlstein’s work, Samuelson observes “The truth is that American capitalism is a joint venture between the private sector and public policies . . . Laissez-faire . . . died a long time ago.  But the interaction of so many pressures frustrates our ability to control the outcome.”  No doubt this is true.  Reading Capitalism in America and Can American Capitalism Survive? sequentially or in tandem is bound to lead to new insights about the shifting roles of the public and private sectors in the evolution of capitalism.

(31 October 2018):A Virginia Farmer Fights to Harvest His UraniumBloomberg.com

——–“Walter Coles Sr. stood on a hill overlooking the Virginia pasture land that his family has farmed since it was deeded to them by Thomas Jefferson, motioning with a sweep of his hand to the expanse of radioactive treasure buried below.  ‘There’s uranium everywhere,’ Coles said of fields that once filed with tobacco.  In fact, his land holds the largest-known deposit of uranium in the U.S., an estimated 119 million pounds that could displace imports that constitute more than 90 percent of the uranium used by the nation’s nuclear power plants.  But the cache, once valued at $6 billion, can’t be mined.”  The Three Mile Island nuclear meltdown in 1979 led the Virginia legislature to impose a moratorium on uranium mining in the state.  Coles is contesting that ban with a group of Canadian investors through their company Virginia Uranium Inc.  “The case has made its way to the U.S. Supreme Court, where arguments will be heard on Nov. 5.”

********This is a good opportunity to see the invisible hand and foot in action.  Clearly Walter Coles Sr. would like the money that might flow from developing his land, which was once valued at $6 billion.  But that can only be done if the resource can be mined and that can only be done if the Supreme Court rules in his favor.  But then there is the non-trivial problem of profitability.  At present, “Uranium prices have declined to about $28 a pound, far below the $64 per pound the Virginia Uranium says is needed for the project to be economic.”  (This makes me wonder about the land valuation—whoever did the valuation must think that uranium prices are going to skyrocket over the life of the project.)  Is there something that can be done to “nudge” prices higher?  Import quotas fit the bill and there are efforts underway to do just that.  Domestic uranium miners Energy Fuels Inc. and Ur-Energy Inc. are seeking “to have the Trump administration slap a 25 percent quota on uranium imports.  The U.S. Commerce Department is investigating the companies’ claims that uranium imports threaten national security, and a decision could come next summer.”  As is often the case, and no doubt exemplified in the books in the article immediately above, political and legal factors frequently play a decisive role in enabling or preventing the formation of markets.

********The U.S. Energy Information Administration is the federal source of energy information and its Energy Explained page provides ready access to information about nonrenewables (like nuclear), renewables, and secondary sources of energy.  You can see a bar graph for uranium imports by country of origin from 1997 to 2017 here, which also shows a bar graph for U.S. uranium concentrate production from 1949 to 2017.  In terms of employment, uranium production is very small on a nation basis—just 424 “person years” in 2017.  You can see the employment data for 1993-2017 here.

********While searching for information about the case, I ran across SCOTUSblog: Supreme Court of the United States Blog.  In addition to a concise statement of the Issue of the case, it provides a precise timeline of the various petitions, briefs, responses, distributions, and so on, of the case Virginia Uranium Inc. v. Warren; John Warren is the Director of the Department of Mines, Minerals and Energy of the Commonwealth of Virginia.

May you have a good week!

Bruce

340 (24 October 2018)

Welcome to week 340!  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.

Please let me know if you have questions or comments.

(17 October 2018):The Retail Apocalypse Can’t Keep Tractor Supply Co. DownBloomberg Businessweek

——–“Last year about 8,200 stores in the U.S. shut their doors for good, according to the International Council of Shopping Centers. . . . Niche rural retailers such as Tractor Supply, which sells obscure and often unwieldy products from fencing to llama kibble, have proved resilient.  The 80-year-old business has seen sales grow 56 percent in the past five years, to $7.3 billion.  Since 2012, Tractor Supply has added 723 locations, and it plans to open 500 more in the U.S. over the next decade.  Apparently the retail apocalypse hasn’t hit the hinterlands.”  Tractor Supply’s tag line is “Everything you need for life out here” and it “informs every decision at Tractor Supply.  The farmers, ranchers, and hobbyists the company caters to ten to have above-average income and below-average cost of living.  They don’t have the time or inclination to wait for products to come from the internet.”

********One thing that comes through clearly in the article is that Tractor Supply knows its customers well.  “Roughly 15 percent of all products in a particular store are unique to the region.  In New Jersey, for example, the salt licks are laced with selenium, a bone-strengthening mineral that’s in short supply in the local soil.”  Tractor Supply isn’t resting on its laurels, though; it is embracing online operations with deliberation.  The company “has giant lockers in about 400 of its stories so customers can claim a digital purchase without having to check out or make small talk.  And each location has a computer kiosk where a customer can order any of the company’s 100,000 items.”  As CEO Gregory Sandfort notes, “It’s a really interesting way of taking a 15,000-square-foot box and making it as large as you want it.”  All this ordering isn’t being done in the store: “Tractor Supply is increasingly seeing its best customers place orders from their pastures.”

********While we are on the subject of retail, there is a lot to like in “With each department store that closes, a world vanishesThe Washington Post.  Journalist Micheline Maynard recalls her youthful work at Jacobson’s, a “long-gone Michigan department store.”  The occasion for her reminiscence?  Sears bankruptcy announcement, an event that also has implications—more sales—for Tractor Supply.  Maynard provides a glimpse of what it was like to work her way up in the store, learning its culture and becoming ever more knowledgeable about her customers—teaching them when necessary—and the products she sold.  By providing a valuable look of what is lost when a retail business closes, Maynard leads one to ask, “What remains in its stead?”

(18 October 2018):HBO’s ‘Price of Everything’ Doesn’t Pull Any PunchesBloomberg.com

********This is a review of HBO’s documentary “Price of Everything,” which looks at “the influence of money on the contemporary art world.”  It will be “in limited release on Oct. 19 and on HBO Nov. 12.”  Directed by Nathaniel Kahn, he creates an image of the art world that is “frequently scathing.  Wealthy investors treat art as an asset class, much like stocks and bonds.  Works that might once have ended up in museums are now more likely to decorate the apartments of the superrich in London, New York, and Singapore.”  This last point is developed with a sorrowful note in the review appearing in The New York Times.  On the occasion of the auction of an art work, art critic Jerry Salz says: “I’m sad to be saying goodbye” as he is unlikely to see “the auctioned-off work again in his lifetime.”  With the sale of the work, it passes into a private sphere from which its emergence into the public sphere is uncertain.

(19 October 2018): [SR]You’re a Bad Investor?  That Can Be GoodThe Wall Street Journal

********This is broadly a review of The Formula: The Universal Laws of Success, by Albert-László Barabási, which will be released on November 6th.  (I don’t understand the title of the article.)  The author is a network scientist at Northeastern University, among his other books are Linked: The New Science of Networks (2002) and Bursts: The Hidden Pattern Behind Everything We Do (2010).  (These earlier books were not enthusiastically reviewed by Amazon customers, especially the latter.)  What I found of greatest interest in the review (by WSJ columnist Jason Zweig) is the distinction between performance and success.  “Performance is deeply linked to the individual” and the “best in the world are barely separated from each other.”  But success is “the collective response of the community to your performance and how well it acknowledges or rewards you for that.”  In brief, performance is individual, while success is a network phenomenon.  I’ll be looking for more opportunities to learn about the book.

(19 October 2018):A Harvest That Requires Flooding, Floating and PumpingThe New York Times

********Ever wonder how cranberries are grown and harvested?  This is your chance to learn as Thanksgiving 2018 comes into view.  The process is more complex than I had thought, involving flooding fields, draining fields, and flooding them again so that ice might protect the plants for next year’s crop.  Cranberry production, it appears, is climate sensitive.

********Speaking of cold, another Wisconsin-based article caught my attention this week: “See inside one of the world’s coldest workplaces in Wisconsin” Milwaukee Journal Sentinel.  Freezers at Chr Hansen, “a food ingredient company based in Copenhagen, Denmark,” store “bacteria cultures used to make cheeses, yogurts and other dairy products, as well as wine and meat products.”  Temperatures in the freezer near 70 degrees below zero Fahrenheit.  Those working in the freezers get a 20-minute break every two hours to warm up.  The suits worn by the workers “have a ‘tilt alarm’ that sounds if a worker falls inside a freezer, initiating a quick rescue response.”  There is a one-minute video to give you a sense of what working in the freezers is like.

********Here is one more addition to the Wisconsin thread: “A tale of two states: Wisconsin is twice as likely to imprison people as MinnesotaThe Economist.  The brief summary of the article provided gives a clear instance of the invisible foot—legal and political forces that affect human behavior: “Mass incarceration is a political choice.  It can be undone.

(21 October 2018): [SR]The Value of Artwork After an Artist’s DeathThe Wall Street Journal

——–“It is a morbid question, but one that many buyers of art ask: ‘If the artist dies, will the price of my artwork go up?’  The surprising answer: probably not.  And in the rare instance that the prices do increase, it may take years to happen.”  Reputation and marketing play a role.  Sometimes an artist dies too young and may miss out on the ability to improve and the greater reputation that would result.  And some artists are very effective promoters of their work—when they die, that promotion disappears.  Also, the death of an artist can also result in “a rush to market of sellers convinced that the artist’s death will lead to instantly higher prices.  Instead, with the increased supply, prices tend to tank.”  But “falling prices aren’t preordained.  How a late artist’s estate is being run can have big impact on the prices of the artist’s works.”

********The author of this article works very deliberately in the context of supply and demand—the invisible hand.  It occurred to me that this subject must have been addressed previously “in the literature” and I found “Reputation, Price, and Death: An Empirical Analysis of Art Price Formation,” Economic Inquiry 29,3 (July 2011): 697-715.  A pdf of a working paper that preceded the article can be found online.

(22 October 2018): [SR]’The Job’ Review: Of Callings and CareersThe Wall Street Journal

——–In The Job: The Future of Work in the Modern Era, journalism professor Ellen Ruppel Shell has written “an unconventional book, providing a vantage point far removed from the economics-based analyses that tend to dominate discussion of the American labor market.  Through stories of jobs in places like the Brooklyn Navy Yard, a cooperatively owned laundromat in Cleveland and a small Finnish sausage factory, the author conjures fresh insights about work as a social institution whose value extends far beyond the dollar amount printed on a paycheck.  Ms. Shell feels that it’s imperative ‘to sort out and fiercely protect those critical elements of work that are essential not only to our economy and our democracy but to our very humanity.’”

********In her analysis Shell notes that some people see their work as a “job,” some as a “career,” and some as a “calling” and provides useful perspective on each, not the least of which is that having a “calling” is not necessarily preferable to a career or a job.  In the course of her analysis she “directly challenges two nuggets of conventional wisdom . . . First, ‘follow your passion’ . . . Second, better education and more skills are not a cure-all.”  In all, The Job looks like a good vehicle to obtaining a wider view of the role of meaning of work today.  Publishers Weekly has a brief review of the book.

May you have a good week!

Bruce

339 (17 October 2018)

Welcome to week 339!  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 October 2018):Free Exchange: Bought and paid forThe Economist

——–“Firms that use political influence to obtain relief from stifling rules may thereby contribute to growth. . . . But firms’ political ties can also be used to weaken rules that protect consumers and to squash competition.  In a new paper Ufuk Akcigit, Salomé Baslandze and Francesca Lotti try to distinguish between such malign purposes and benign ones in the case of Italy.”  They found that “The larger and more dominant companies are, the more they invest in political connections.  As their market position strengthens, they engage in more political hiring but register fewer patents.  Political connections appear deadly to economic dynamism.  Firms with lots of them are much less likely to go out of business; and industries with lots of politically well-connect firms see fewer new firms enter.”  It appears from their work that there is no “strong link between connections to politically successful parties and productivity growth . . . Almost all  value of cultivating politicians seem to come from a more secure market position, rather than a lighter regulatory load.”

********The article concludes, “It seems ever clearer that, when corporations open their wallets to politicians, the public loses.”  These losses seem to be a result of “barriers to competition.”  I would be curious to see how this connects with Adam Winkler’s book: We the Corporations: How American Business Won Their Civil Rights.

(12 October 2018): A Map of Every Building in AmericaThe New York Times

********The NYT has created a tool that allow one to “find maps showing almost every building in the United States.”  Why?  To create an opportunity for one “to connect with the country’s cities and explore them in detail.  To find the familiar, and to discover the unfamiliar.”  For really looking at each structure, Google Maps is the way to go, but to get a high-level look at buildings and settlement patterns, the NYT’s tool is the way to go.  There is a search bar to input a zip code and there is a limited ability to zoom in and out.  What an exciting them, I would think, to be a student of economic geography given the data sets now available.  Here is a brief article that surveys some of the early contributors to location theory, which “has become an integral part of economic geography, regional science, and spatial economics.”

(12 October 2018):Theranos Criminal Case Is Broader Than Publicly Disclosed, Prosecutors SayBloomberg.com

********I just completed Bad Blood: Secrets and Lies in a Silicon Valley Startup, which was published earlier this year.  It is, to say the least, a disturbing tale of how many, many people were taken in by Theranos by way of the persuasiveness and sense of purpose of Elizabeth Holmes and the pugnaciousness of Ramesh “Sunny” Balwani.  There is nothing pretty in what I have read, even though the vision itself may have been noble.  But, as it is said, “There’s many a slip twixt the cup and the lip.”  This article is an update on the federal government’s ongoing criminal fraud case “against former Theranos Inc. Chief Executive Officer Elizabeth Holmes and former President Ramesh ‘Sunny’ Balwani” is of great interest.  In 2014, Theranos and Elizabeth Holmes were riding high, as exemplified by the Fortune article “This CEO is out for blood.”  (This article was noted in TIF 166 (25 June 2014.)  In 2015 the reporter, Roger Parloff, wrote the follow-up story “How Theranos Misled Me.”  Since the trial is underway, you can learn more every day.  Here is something from October 16th.

********If you are interested in the sort of documents generated by the Theranos trial, here is the link to learn more.  You can downlead the June 14, 2018 indictment and follow what appears to be all of the motions, notices, orders, and proceeding transcripts for the trial.  Many of these are free of charge, others require payment.  These documents are the meat and potatoes of the invisible foot.  These documents carry one up to the present and will, as I understand, continue.  All this is the work of Court Listener, of the Free Law Project.  You can learn more here.

(12 October 2018):When Your Boss Is an AlgorithmThe New York Times

********This is an author-bylined article by Alex Rosenblat, whose Uberland: How Algorithms Are Rewriting the Rules of Work will release on October 23rd.  Over four years of research “interviewing 125 drivers for Uber and other ride-hailing apps, as well as taxi drivers” Rosenblat “learned that drivers at ride-hailing companies may have the freedom and flexibility of gig economy work, but they are still at the mercy of a boss—an algorithmic boss.”  That boss “seems to watch everything you do.  Ride-hailing platforms track a variety of personalize statistics, including ride acceptance rates, cancellation rates, hours spent logged in to the app and trips completed.  And they display selected statistics to individual drivers as motivating tools, like ‘You’re in the top 10 percent of partner!’”  This is, of course, merely a specific example of the increasingly common practice of continual monitoring of human behavior by software.  It is used in auto insurance, in educational settings, health, and in a variety of workplace settings.  By reading and reflecting upon the content of this article and Uberland, we will be in a better position to understand the downsides and upsides of the continual monitoring of human behavior by software.  We are, I suspect, only at the thin edge of a very long wedge.

(12 October 2018):Forget Stoners.  The Real Money Is in Medical MarijuanaBloomberg Businessweek

——–Canada will legalize the use of recreational marijuana on Wednesday, October 17th.  But “the real money could be made in medicine.  More than 20 countries, including Germany, Mexico, and Australia, have approved the use of medical marijuana.  Denmark and Luxembourg have taken steps to legalize the drug for medical use.  The U.K. plans to allow prescriptions for cannabis-derived medicine by fall, and investors expect many more to follow. . . . The global medical pot market could be worth more than $50 billion by 2025, from $8 billion in 2017, 10 times the projected size of Canada’s total marijuana sector, according to PI Financial Corp.”  It is thought that the “biggest opportunity for medical marijuana could be in pain treatment . . . The opioid crisis across North America has physicians and patients seeking safer alternatives in the pain sphere.

********Bloomberg Businessweek has a nice article on the terminology of legal marijuana: ”A Crash Course for Investors on the Lingo of (Legal) Weed.”  It is impressive to see the growth of sales when the wall between a legal and illegal market is torn down.  While you are “learning the lingo” for investing, you might also want to know what you could invest in.  Here is “A Guide to Cannabis investing” provided by Bloomberg.com.

(14 October 2018): After Nobel In Economics, William Nordhaus Talks About Who’s Getting His Pollution-Tax Ideas RightThe New York Times

——–William Nordhaus believes that the efforts of the European Union to use cap-and-trade to fight climate change have been “a catastrophic failure.”  But there are places in the world—notably, parts of Canada and South Korea—[where] politicians have . . . [used carbon taxation] in ways that also reframe it not as a tax, but as a financial windfall for taxpayers.  Other governments, including China and some individual states in the United States, are also testing different ways to force companies to pay to pollute.  In short, the world is becoming a laboratory for theories that Professor Nordhaus developed decades ago, when global warming was an abstract future threat.”

********This article is essentially a Q&A with Professor Nordhaus on the political challenges on dealing with policies to deal with climate change.  In his view, what is lacking in the U.S. are grown-ups.  “In other countries, people are grown-ups, and they can live with taxes.”

********In a related article, “Clean up climate change?  It’s just good for businessThe Washington Post, the point is made that an increasing number of corporations are recognizing that they must do something to combat climate change regardless of what the federal government does.  One thing that especially stood out for me is this statement: “One analysis shows that half of the globe’s emissions since 1988 are traceable to just 25 private and state-owned fossil fuel corporations.”  It is based upon “The Carbon Majors Database: CDP Carbon Majors Report 2017.”

(15 October 2018):What’s Monopsony?  It May Be the Reason You Haven’t Had a RaiseBloomberg Businessweek

——–“Now that unemployment has touched its lowest level since 1969, economists are puzzling even more over why wages haven’t been rising faster.  After all, with fewer prospective workers seeking jobs, employers should be having to pay up to attract new employees and keep the ones they have.  One theory about what’s going [on] carries the name monopsony.”

********This is the lead paragraph of a QuickTake on monopsony, which is usually defined as a market with one buyer.  Careful definitions also include the notion that there are many sellers.  (Compare this to monopoly, where there is one seller and many buyers.)  It is conventional to discuss monopsony in relation to labor markets, for example, the labor markets of company towns, like those producing textiles or coal.  The article does a nice job of discussing the growing relevance of monopsony and provides interesting links to different types of literature.  The 12-page article “Modern Models of Monopsony in Labor Markets: A Brief Survey” provides a more technical, math-based discussion.

May you have a good week!

Bruce

338 (10 October 2018)

Welcome to week 338!  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.

(1 October 2018): Review of American Prison: A Reporter’s Undercover Journey into the Business of Punishment, by Shane BauerThe New York Times

——–In 2016 Shane Bauer wrote “a 35,000-word exposé that ran in Mother Jones . . . an article that immediately became one of the most celebrated achievements in that venerable publication’s recent renaissance.”  American Prison “reprises that page-turning narrative, and adds not only the fascinating back story of CCA [Corrections Corporation of America, now CoreCivic], the nation’s first private prison company, but also an eye-opening examination of the history of corrections as a profit-making enterprise, of which the advent of the private prisons that now house 8 percent of American inmates is only the latest chapter.”

********This book has “sparked comparisons” to Newjack, by Ted Conover, “who spent a year in the late 1990s working at New York’s infamous Sing Sing prison to better understand what it’s like to pursue a career as a professional jailer.  But this is not what Bauer is writing about, because a career is not what a company like CCA offers its employees.”  The employees at Sing Sing could really have a career, with extensive initial and regular training, good pay, and benefits, whereas the workers at CCA get little training, low pay, and don’t stay long.  It is hard to avoid the conclusion that in the drive to lower costs people have simple forgotten (or do not care) about the resulting reduction in quality.

********Here is the link to American Prison.  You can learn more about CCA, now known as CoreCivic, here.  I found the Facility Locater to be interesting.  North Carolina has no CoreCivic facilities, like bordering states South Carolina and Virginia.  However, Georgia has 6 facilities and Tennessee 9.

(8 October 2018):Nobel in economics goes to two Americans for studying climate change and sustainable growthThe Los Angeles Times

********The Nobel Memorial Prize in Economic Sciences for 2018 was awarded to William Nordhaus of Yale University and Paul Romer of New York University.  This event has received wide coverage—there are many good articles on it.  I have chosen this one because it quotes David Warsh, the former reporter for The Boston Globe who has long reported on the leading lights of economics, including a book on the work of Paul Romer, and continues to write his weekly blog Economic Principals.  When asked if the Nobel Committee was sending a message by awarding the prize to Nordhaus and Rome “at a time of escalating alarm over climate change” he replied clearly: “Darn right they were sending a message.”  I’m looking forward to learning in more detail Warsh’s thoughts on the award, which will have uncommon depth and relevance.

********Probably the best source of materials on this year’s awards is provided at the Nobel Prize website.  There you will see the citations for both laureates:

The Sveriges Riksbank Prize in Economic Sciences in Memory of Alfred Nobel 2018 was divided equally between William D. Nordhaus “for integrating climate change into long-run macroeconomic analysis” and Paul M. Romer “for integrating technological innovations into long-run macroeconomic analysis.

In brief, their work looks at different aspects of “long-run macroeconomic analysis.”  Nordhaus examines the role of climate and Romer the role of ideas.  The Nobel Committee seems to be pointing to the potential synergy between their works.  To learn more about their contributions, use the drop-down menu of the Nobel Prize website to navigate to: a Summary; the Prize announcement; the Press release; Advanced information; and Popular information.  The last item on the list includes “Popular science background: Integrating nature and knowledge into economics” that looks accessible; it is eight pages long.

********During the week I finished reading The World in a Grain: The Story of Sand and How It Transformed Civilization, by Vince Beiser.  I wanted to review the book for TIF Weekly, but thought maybe it had already been done well enough—it had.  NPR has a nice, brief review by Genevieve Valentine.  While looking for a review it occurred to me that Grain fits nicely in the narrative being created around this year’s awarding of the Nobel Prize in Economics.

********Grain examines the central role of sand in the development of the modern “built world” and how sand mining has resulted in environmental degradation.  Basically, sand is used in the roads we drive on, the windows we look through, and the buildings we live and work in.  And all that sand, which is definitely not homogeneous, comes from some place—river beds, farm lands, and ocean floors—which are the worse for their extraction.  The stories that Beiser tells take us to Spruce Pine, North Carolina (the source of perhaps the world’s purest crystalline sand—essential for our digital age), Chippewa County, Wisconsin (the source of an especially important sand used in fracking), Dubai (where islands made of sand are sold to the ultra-wealthy), and the South China Sea (where islands made of sand extend Chinese military power).  As the book winds down, I was left with the clear sense of the fragility of the world we have built: roads that deteriorate, windows that break, and concrete the crumbles away as reinforcing rods rust.

(8 October 2018): [SR]The U.S.-China Trade Battles Spawns a New Era of Tariff DodgesThe Wall Street Journal

——–“Every product imported into the U.S. carries a 10-digit designation called an HTS code, of which there are 18,926 in all.  Like a taxonomic version of Noah’s Ark, the code provides a common language to bridge disparate markets and identify products in all their variety.  In a world of increasing tariffs, the code has another function: evading those levies.  The business of code-fudging is expanding in step with tariff increases, undermining U.S. efforts to shield American business from foreign competition, according to importers, customs officials, trade attorneys and shipping brokers.  As trade conflict grows between the two largest economies, these professionals say, code misclassification is starting to compete with transshipments—the rerouting of goods through third countries—as a way to duck tariffs.”

********The article provides examples primarily drawn from the world of plywood.  “The U.S. coding system called HTS—for Harmonized Tariff Schedule—contains 88 separate plywood codes, differentiating by types of wood and thickness variations down to the millimeter.”  You can peruse the current HTS here.  This apparatus, of course, wasn’t just created—it dates back to 1989—it is just that some of the duties have recently changed, so there is now an incentive to reclassify products so that they are subject to lower rates.  In effect, pick-and-choose tariffs encourage pick-and-choose product reclassification.

(9 October 2018):Ominous UN Climate Report May Be Good News for One IndustryBloomberg.com

********The release of the U.N. Special Climate Report Global Warming of 1.5℃ has given rise to reaction by many, including the business press; the Report has a 34-page Summary for Policymakers.  This article points to one industry that will have to play a large part in any meaningful attempt to address climate change: carbon capture and storage (CCS). Regarding that, the Report noted that “CCS . . . will be needed for ‘all pathways’ to limit global warming to 1.5 degrees Celsius (2.7 Fahrenheit) . . . Their conclusion is welcome news for big energy companies led by Royal Dutch Shell Plc, Statoil ASA and Total SA, which are studying how to deploy CCS to safeguard the emissions they produce from oil and gas reservoirs.”

(9 October 2018): [SR] Thousands of Southerners Planted Trees for Retirement.  It Didn’t WorkThe Wall Street Journal

——–In the “depths of the 1980s farm crisis, when prices for agricultural commodities plunged, the Reagan administration launched the Conservation Reserve Program.  Starting in 1986, it promised farmers annual payments of about $30 to $50 for each acre they planted with trees or grasses.  Many seized the offer.  By 1994, more than 2.2 million acres of farmland in the South had been converted to pine plantation, much of it in Mississippi, Alabama and Georgia.”  Thirty years later a “glut of timber has piled up in the Southeast.  There are far more ready-to-cut trees than the region’s mills can saw or pulp.  The surfeit has crushed timber prices in Mississippi, Alabama and several other states.”  This development has “been tough for the individuals and families who own much of the South’s forestland, and who had banked on its operating as a  college fund or retirement account. . . . Many of the owners were counting on forests as a long-term investment that could be replenished and passed on to heirs.”

********A nice piece, too few of which I have seen in the WSJ in recent years.  It provides a good example of the role of the legal and political factors in economic affairs.  I do wonder if the government or individuals took into consideration prospective price declines when they made their decisions to plant.  Although one farmer planting trees will have, for all practical purposes, no effect on market prices, millions of farmers—it is estimated that there are “more than six million owners of at least 10 wooded acres” in the South—will definitely have an effect on market prices.

May you have a good week!

Bruce

337 (3 October 2018)

Welcome to week 337!  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.

This week has been disrupted a bit.  Rather than delaying “publication,” I have decided to send out TIF Weekly with minimal description and commentary.

(10 September 2018):Review of Heartland: A Memoir of Working Hard and Being Broke in the Richest Country on Earth, by Sarah Smarsh.”

——–Raised by those who voted against their interests, “Smarsh is an invaluable guide to flyover country, worth 20 abstract-noun-espousing op-ed columnists.”  Her book “is one of a growing number of important works—including” Evicted by Matthew Desmond and Janesville, by Amy Goldstein.  Perhaps these books “merit their own section in nonfiction aisles across the country: America’s postindustrial decline.”

********Matthew Desmond’s recent article (September 11th) in The New York Times, “Americans Want to Believe Jobs are the Solution to Poverty.  They’re Not” relates well to Smarsh’s book.  He makes a good point when he writes: “If you believe that people are poor because they are not working, then the solution is not to make work pay, but to make the poor work—to force them to clock in somewhere, anywhere, and log as many hours as they can.”  To counter this all-too-familiar attitude, he argues that “When it comes to poverty, a willingness to work is not the problem, and work itself is no longer the solution.”

(26 September 2018): How Dixon Ticonderoga has blurred lines of where its pencils are madeThe Washington Post

********That “Made in America” pencil probably isn’t given a common-sense view.  I found it interesting that there was a Dixon Ticonderoga pencil on the dining room table when I read this article.

(27 September 2018):The Metal That Started Trump’s Trade WarBloomberg Businessweek

********This is an opportunity to learn a bit about the U.S. aluminum market and the role of Section 232 of the Trade Expansion Act of 1962, which is being used to rationalize the imposition of tariffs in the name of national security.  Few companies are happy with the tariffs—the auto industry and brewers are especially unhappy—but Century Aluminum, whose larger shareholder is Switzerland-based Glencore Plc, is very happy as it means its massive stockpile of foreign-made aluminum in the U.S. as worth much more and its manufacturing prospects are looking up.

********Of related interest is “The Real Pain From Trump’s Tariffs Trickles Down to ConsumersBloomberg Businessweek.

(1 October 2018):Detailed New National Maps Show How Neighborhoods Shape Children for LifeThe New York Times

********Small changes in neighborhood, for roughly the same geographical area, can make large changes in life (earnings) outcomes.  The Seattle Housing Authority is offering vouchers to enable families to move to better neighborhoods.

(1 October 2018):The World’s Most Beautiful BatteryBloomberg.com

********High in the Alps, the Kaprun hydroelectric station stores water that can be released to generate power.  Time-of-day energy prices makes this a profitable practice, especially at a time when the use of renewable energy sources like solar and wind are expanding their contribution to the energy supply.

(2 October 2018):Monopsony: When there’s only one employer in townMarketplace

********When there is only one employer, or there is one very powerful employer, wages will be less—this typically is an issue in rural areas and tends to affect women disproportionately.  Monopsony is especially common in (1) retail and tech, (2) K-12 school districts, and (3) franchising with “no-poach” rules.

May you have a good week!

Bruce