322 (20 June 2018)

Welcome to week 322!  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 may be found by an Internet title search.

Please let me know if you have questions or comments.

(15 June 2018): Why Aren’t More Men Working?The New York Times

——–Although the unemployment rate is 3.8 percent, the lowest in many years, “that number hides a perplexing anomaly: The percentage of men who are neither working nor looking for work has risen substantially over the past several decades.”  Such people are out of the labor force, according to the Bureau of Labor Statistics, in contrast to being employed (working) or unemployed (not working and looking for work).  From 1950 to today, the percentage of men out of the labor force has increased from 14 percent to 31 percent.  In contrast and for the same period, the percentage of women out of the labor force has decreased from 66 percent to 43 percent.  The question is, why has the percentage of men out of the labor force “nearly tripled?”  Explanations vary, from “declining opportunities for those with low levels of education” to “skill-biased technological change” to trends in international trade to an expanding social safety net.

********The author of the article is N. Gregory Mankiw, a professor of economics at Harvard University.  I am intrigued by the questions asked of data.  The percentage of men out of the labor force is going up and the percentage of women out of the labor force is going down, but it is the percentage of men that is the object of inquiry.  I suspect that a lot could be learned by looking at the common factors affecting both men and women.

(15 June 2018):’Dying at your desk is not a retirement plan’The Washington Post

********If you haven’t retired and aspire to retire, this article provides some ideas to consider.  It elicited one thousand comments.

(18 June 2018): Climate Change May Already Be Hitting the Housing MarketBloomberg.com

——–A new study by Attom Data Solutions, a curator of national property data, for Bloomberg News found that between “2007 and 2017, average home prices in areas facing the lowest risk of flooding, hurricanes and wildfires have far outpaced those with the greatest risk. . . . Homes in areas most exposed to flood and hurricane risk were worth less last year, on average, than a decade earlier.”  Attom Data “looked at the annual change in home prices and sales across 3,397 cities across the country, then divided those cities into five groups based on their exposure to various types of natural disasters.”

********The risk categories used by Attom Data are: Very Low, Low, Moderate, High, and Very High.  These results are now increasingly familiar but there are two things here that are new.  First, the sheer number of cities—3,396—examined.  Second, the variety of events considered—flooding, hurricanes, and wildfires.  Wildfires, in particular, provide another look at climate-related risk and property value.  As the article notes, the data “suggest the relationship between climate risk and home prices isn’t always a straight line.  That’s because home buyers have to weigh the risk of disasters against the so-called amenity value of living near water or at the edge of the forest.”  This calls out for a multivariable analysis of property value in which climate change risk is one of many explanatory variables

********Real estate markets have clearly been affected by climate change but so have energy markets, as noted in “Coal Plants Keep Shutting Despite Trump’s Order to Rescue ThemBloomberg.com.  On June 1st the president “ordered Energy Secretary Rick Perry . . . to take immediate action to stem further coal and nuclear plant closures in the name of national security.”  However, “utilities are reluctant to reverse course on plans put in motion years ago or to backtrack on pledges to embrace renewable energy.”  The move toward closing coal-fired power plants “has been underway for years.  Since 2010, nearly  40 percent of the capacity of the nation’s fleet . . . has either been shut down or designated for closure.”  And, according to Bloomberg New Energy Finance, “More than a quarter of U.S. nuclear power plants don’t make enough money to cover their operating costs, raising the threat of early retirements.”

********Contributing to the challenges faced by coal-fired and nuclear power plants is the decreasing cost of batteries and battery storage.  This is examined, with a particular emphasis on lithium-ion batteries for cars, in “How Batteries Went From Primitive Power to Global DominationBloomberg.com.

********This is a good place to call attention to work given impetus my Michael Bloomberg regarding the consequences of climate change.  First, there is the Risky Business project, which examines “the bottom line on climate change.”  It generated five reports on risk and return in relation to climate change and its regional and national impacts.  Second, there is the Task Force on Climate-related Financial Disclosures, which seeks to “develop voluntary, consistent climate-related financial risk disclosures for use by companies in providing information to investors, lenders, insurers, and other stakeholders.”

(20 June 2018):This Form of Legal Immigration Is SoaringBloomberg.com

——–“As the fight over undocumented immigrants reaches a fever pitch along the U.S.-Mexican border, a surging number of farmworkers are arriving to pick tobacco, sweet potatoes and blueberries—and doing so legally.  The number of migrant workers in the U.S. on temporary agricultural visas is up 159 percent since 2011, as U.S. farmers seek replacements for the thousands of undocumented farmworkers scared away by anti-immigrant policies.  Now the farm lobby is pushing for changes that will allow farmers to double the number of legal immigrants, permit them to stay longer and cut the overall costs associated with using them. . . . The current farmworker visa program, called H2-A, has been reviled by growers for years, both because of its bureaucracy and costs.  Many avoided using it when illegal farm labor was more plentiful and less risky years. . . . For their part, undocumented workers prefer construction jobs, which are generally less seasonal and better paying,” according to Lee Wicker, the deputy direct of the North Carolina Growers Association.  He noted that “Farmworkers are not crossing the border illegally anymore to take a farm job.”

********This is another one of those articles that asks us to think about the relationships between legal and illegal activity, and how the invisible forces, especially the invisible foot of legal and political forces, affect them.  Concern about the prevalence of undocumented workers and illegal immigration resulted in the institution of H2-A visas, as well as the concomitant expansion of farm raids by ICE personnel.  The resulting labor shortages led to an increase in the demand for H2-A visas, as growers sought to bring in the crops.  Meanwhile, the undocumented have something new to consider, the possibility of an ICE apprehension.  If we are to believe the words of Lee Wicker, cited above, the result of that consideration has been for undocumented workers to focus more on construction than on farm work.

********A factor that will surely dramatically affect the demand for farm workers, legal or not, in the future is the continuing technological development of agriculture.  This is alluded to in “Deere Legal Battle Highlights Race for $240 Billion Farm Tech MarketBloomberg.com.  Once again, the invisible foot is at work, but in this case it is a matter of patent, rather than immigration, law.

(July/August 2018): “How to Fight Amazon (Before You Turn 29)” The Atlantic

——–The work of Lena Khan, a 29-year-old legal scholar, has been “cited approvingly by the lefty, rabble-rousing congressman Keith Ellison and by a Trump-appointed assistant attorney general, Makan Delrahim.  She has been interviewed by NPR and written op-eds for The New York Times.  She has done it neither by focusing on a hot-button issue nor my cultivating a telegenic demeanor.  She is just a young adult . . . interested in an old topic: antitrust law, that musty corner of American jurisprudence aimed at curtailing monopoly power.”  The work of Khan and her colleagues at the Open Markets Institute, in Washington, D.C., has included traditional antitrust topics such as cartel formation and prices kept artificially high, but more than that they are looking at potentially harmful cases where “monopolies appear to benefit consumers by offering free services or lows prices.”  Frequent targets of the group “are some of the most popular companies in America: Google, Facebook, and the one to which Khan has committed much of her published work, Amazon.  She tells a comprehensive story about how these companies make Americans less free.”

********Khan’s signal article is the 2017 “Amazon’s Antitrust ParadoxThe Yale Law Journal, which is available as a pdf.  According to its Abstract, “the current framework in antitrust—specifically its pegging competition to ‘consumer welfare,’ defined as short-term price effects—is unequipped to capture the architecture of market power in the modern economy.  We cannot cognize the potential harms to competition posed by Amazon’s dominance if we measure competition primarily through price and output.  Specifically, current doctrine underappreciates the risk of predatory pricing and how integration across distinct business lines may proved anticompetitive.”  Khan’s article is long—96-pages—but looks to provide a valuable framework for thinking about the online giants that increasingly affect our lives.

May you have a good week!  Bruce


321 (13 June 2018)

Welcome to week 321!  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 may be found by an Internet title search.

If you have questions or comments, please send them.

(5 June 2018): Could Ocean’s 8 Actually Work?Bloomberg.com

********The subtitle of this article is “Why stealing giant diamonds is a terrible, no good, very bad idea.”  This piece is not so much about the just-released movie but rather what one might be able to retain from stealing a diamond necklace worth $150 million.  Not too much, it seems.  As Martin Rapaport of a diamond-market company notes, “There’s legitimate and illegitimate markets . . . The spread . . . in the thieves’ market is really low . . . The buyer knows they’ve got you by the balls.  Who are you going to sell it to?  And if they rip it off, who are you going to complain to?”  In the end, such expensive pieces are well known, and everyone involved in the process wants to be well-compensated for this knowledge and their participation in the process.  Rothauser recommends that fictional and real  thieves stick with gold.  “You steal gold bars, and no one knows anything . . . It’s a commodity.  It’s like stealing truckloads of water.  But diamonds?  If someone gives me a necklace and claims it’s worth $150 million and I try to sell it—or even just a couple of its stones—everyone would know.  They turn me in just for the PR value alone.”

(7 June 2018): America’s Largest Private Company Reboots a 153-Year-Old StrategyBloomberg Businessweek

——–Minnesota-based Cargill is the largest privately-held company in the U.S., with 2017 revenues of $109.7 billion and 155,000 employees.  Its commodities trading business has long derived profits by acting as a middleman between farmers and food companies, employing an informational advantage driven by size and scope of its global operations.  With the Internet, that advantage is diminishing and it “has lowered the spread that Cargill and other big buyers used to make on such deals.”  In response to these new conditions, Cargill’s CEO David MacLennan is aiming “to remake Cargill into less of a trading operation and more of an integrated food company betting on growing global demand for proteins.  Already the world’s No. 1 supplier of ground beef and the second-largest beef packers in the U.S., trailing only Tyson Foods Inc., Cargill is expanding aggressively into aquaculture.  The company is also spending heavily on technology services.”

********The article provides a relatively-brief case study on how one very large private company is responding to a new business environment.  I found two things especially noteworthy.  First, “Agriculture is moving from a pure commodities business, where each bushel of wheat or corn is considered functionally identical, to an ingredients business, where consumers demand differentiation, such as organic produce and foodstuffs grown without genetically modified organisms.”  The inability of traders to “substitute one origin for another . . . reduces their ability to make money from the supply chain.”  Second, “The Food and Agriculture Organization of the United Nations says farmed fish overtook wild catches as the main source of seafood for human consumption in 2014, replicating the shift that occurred centuries ago in livestock when humans started to raise cows, pigs, and other animals as food.”  Surely this development is due to the contraction of wild populations as well as the expansion of farmed populations.

********There is another article that has a different angle on product differentiation and markets: [SR]’We Got Lazy’: U.S. Recyclers Try Cleaning Up Their ScrapThe Wall Street Journal.  Here is the product is recycled materials.  “American trash haulers and recyclers are becoming more prudent about how they collect and sort scrap after China stopped accepting most U.S. scrap exports earlier this year.  The move has upended the U.S. recycling industry: Prices for recyclables are plunging, a glut of paper and plastic is accumulating in warehouses and some material is being sent to landfills.  As a result, some recyclers have focused on producing cleaners loads of paper, plastic and corrugated cardboard, which can fetch higher prices.”  In recycled materials, as well as grains, buyers care about product quality.

(7 June 2018):America’s gig economy is smaller now than before Uber existed, official data showThe Washington Post

——–“Companies like Uber and Lyft—which offer workers flexible work without being employed by a traditional company—have been held up as transformational forces in the American economy. . . . But the gig-economy, which has drawn billions of dollars in venture capital and praise but deep criticism from policy makers, appears not to have caused the massive disruption to the economy that many originally thought.  A new report from the Bureau of Labor Statistics, the first in 13 years on the topic, says the share of U.S. workers in these types of jobs has shrunk from 7.4 percent in 2005, before Uber and its like existed, to 6.9 percent in 2017. . . . The findings suggest that while the nature of work may be changing in certain fields like transportation, there is no dramatic shift away from traditional employment in the economy.”

********The BLS report was widely reported but I found the graphs of The Washington Post to be the most illuminating.  The results of the survey are certainly at variance with the conventional narrative, one that I’ve bought into, of the expanding gig economy.  Perhaps the results were influence by the fact that the BLS “asked people only about their primary job, meaning if someone is driving for Lyft in the evenings or weekends to earn more money, that does not appear in the report.”  It just might be that the primary job that people have is paying so little that they are working their primary job and a gig job.  More research could shed light on this, but it seems like the funding for such additional surveys, at shorter time intervals, is not likely to be forthcoming.

(7 June 2018): “The market for driverless cars will head towards monopoly” The Economist

********A one-page exploration of some of the factors that are likely to lead to a highly concentrated industry for driverless cars.  One part of the argument is safety, it being argued that consumers are likely, all things being equal, to purchase (or use) driverless vehicles with better safety records.  Even now there are large differences in those records.  “Between December2016 and November 2017 Waymo reported three collisions in 350,000 miles . . . of driving in California; GM, the nearest American competitor, had 22 in 132,000.  Neither has been involved in a fatal accident, as Tesla and Uber have.”  Also of interest is the brief discussion of ethical considerations in relation to regulation and the possibility of internalizing congestion effects when a particular type of driverless vehicle software is widely employed.

(8 June 2018):Shale country is out of workers.  That means $140,000 for a truck driver and 100$ pay hikesThe Los Angeles Times

——–Labor and housing markets in the Permian Basis of Texas are on fire due to the boom in shale oil production.  “The oil industry has such a ferocious appetite for workers that it’ll hire just about anyone with the most basic skills.”  Sales-tax collections for municipalities are increasing from expanded output but some of those revenues may needed to provide higher wages for city workers to keep them from leaving for the oil fields.

********It sounds like towns in the Permian Basin are experiencing the consequences of increased shale oil production just like North Dakota did a few years back.  One difference, though, is that booms are nothing new to those in the Permian Basis.  As a result, they might be better able to foresee and cope with the seemingly inevitable end of the boom.  One interesting part of the story involves enrollments in programs at Midland College.  Its oil and gas program, “which trains for positions like petroleum-energy technician enrollment is down about 20% from last year.  But schools that teach how to pass the tests for a CDL—commercial driver’s license—are packed.”  With such drivers earning upward of $100,000, it is not hard to see why.

(11 June 2018): “Dairy Farms Find a Lifeline: Beer” The New York Times

——–Dairy across the U.S. are having a hard time making ends meet, with milk prices cratering “driven by high supply and falling demand.”  Sean DuBois, who with his wife Molly Stevens runs the 1,000-acre Carter & Stevens Farm in Massachusetts, notes: “To succeed today as a dairy farm, you need to diversify.”  For their farm, that has meant a turn toward craft beer.  They opened Stone Cow Brewery on the farm in 2016, “making beers like the Roll in the Hay I.P.A., which sells for $7 a pint at its taproom.  That makes the beverage much more profitable than the dairy’s raw milk, which currently sells wholesale for about 16 cents per pint, even though it costs more to produce.”  All this is another chapter in “the dairy and brewing industries’ interlinked history.  Brewers often supply farmers with spent grains for feed, and many American craft breweries have started by using secondhand dairy infrastructure.”  In fact, “Ken Grossman founded Sierra Nevada Brewing Co. in Chico, Calif., in 1980 with equipment scavenged from closed Midwestern dairies.”

********Clearly dairy farmers are up against it, helping to explain presidential rants about Canadian milk tariffs, as well as the efforts of North Carolina state representatives to delete the reference to ‘milk’ in almond milk.  We see, then, three different approaches to a serious challenge for dairy farmers: diversification, jawboning, and legislation.

(13 June 2018):Baby Food for Baby BoomersJSTOR Daily

——–Modern baby food began in 1928 when “Daniel Gerber launched his first line of mass-produced canned strained peas for babies . . . The product became popular after World War II, when . . . Americans went on a nationwide spending spree.  This embrace of consumerism included a new love of industrially-produced products like baby food. . . . By 1958 . . . 90 percent of mothers reported feeding their babies commercial baby food.”

********An interesting brief post about some of the factors that led to the widespread acceptance of mass-marketed baby food.

May you have a good week!  Bruce

320 (6 June 2018)

Welcome to week 320!  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 may be found by an Internet title search.

If you have questions or comments, please send them.

(30 May 2018): Are avocados toast?  California farmers bet on what we’ll be eating in 2050The Guardian (originally published in Grist)

——–For farmers “planting trees they hope will bear fruit 25 years from now,” climate change projections must be considered now.  California, which produces “two-thirds of the fruits and nuts for the United States” and is the locus for a wine industry with grapevines that “bear abundant fruit for about 25 years . . . but can keep going for hundreds of years,” is a state that is “highly sensitive to climate change.”  Experienced farmers like Chris Sayer, whose Ventura land has been in the family for 130 years, make crop decisions in light of three risks: climate, market, and execution.  Reflection on those risks influence whether an orchard is replaced with another orchard, an annual crop, or turned into houses.

********The article touches upon a wide variety of matters that farmers must take into consideration as a matter of course.  What especially struck me was Chris Sayer’s discussion of execution risk, which involved learning the ins and outs of growing a crop, especially a new one, as well as making market connections.

(30 May 2018): [SR] Rural America Has Jobs.  Now It Just Needs HousingThe Wall Street Journal

——–Austin Steinbach was all set to move to the rural farming town of Columbus, Nebraska “for a job that offered benefits, a $500 signing bonus and a higher wage.  But the 25-year-old father of two had to turn it down after a week-long search with his wife for a home failed to turn up anything livable or in their price range. . . . Instead, Mr. Steinbach will stay in Creston, Iowa, where he supports his family earning $2 less an hour power-washing farm equipment and has no benefits.”  Finding affordable and livable housing is a significant problem.  “Fewer homes are being built per household than at almost any time in U.S. history, and it is even worse in rural communities.”  Developers find it more expensive to build there and “Rural areas are also seeing their populations stagnate or decline as younger people opt for urban living, adding to  the gamble involved in speculative building.”  These factors make it more challenging to attract new businesses to rural areas.

********This is not a new problem.  The Atlantic published a nice piece on the subject in January 2015.  This article clearly relates to Chris Sayer’s options as described in the avocados article above.

(31 May 2018): [SR]Tech’s Titans Tiptoe Toward MonopolyThe Wall Street Journal

********This article is hard to summarize.  It considers Amazon, Apple, Facebook, and Google, and asks us to consider a day when they might be ripe for regulatory action, such as that placed upon the likes of once-dominant firms like AT&T, Standard Oil, and Western Union.  Interestingly, of the four tech giants, “Apple is considered more vulnerable to competitive disruption, despite the fact that it tops the tech world in revenue, profit and market capitalization.”  Regarding these firms, researcher Glen Weyl notes, “Companies go one of two ways—some are in areas where declining returns to scale set in and they get tamed by market processes . . . And other companies get tamed by getting turned into a public utility.  And until they are, they reap extortionate profits.”

(1 June 2018):Why Inconsistent Income Needs Consistent PlanningThe New York Times

——–“Professional athletes, Hollywood players, even tech entrepreneurs whose company rises to a billion-dollar valuation would not seem to need wealth planning.”  But what they share “with many others is an inconsistent income.  It comes in bulk early in their career or later in chunks that are unpredictable.”  Joe McLean, the managing partner of Intersect Capital “and a former professional basketball player in Europe, has drafted a list of 50 reasons that professional athletes and entrepreneurs stay wealthy.”  McLean realizes that it can be heard advising someone who has already “beat the odds” by becoming successful where most others fail.  As a result, he tends to focus on money basics, such as paying off debt, attending to credit scores, and knowing who to trust.

********As work becomes more gig like, inconsistent income will be an increasingly important factor to consider, so these issues are not only ones to be considered by professional athletes in the prime of their careers.  Here is McLean’s list.

********While we are on the subject of financial advice, here is something relating to charitable giving.  The subject is “effective altruism” in the article “Faith, hope and clarityThe Economist.

May you have a good week!  Bruce

319 (30 May 2018)

Welcome to week 319!  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 may be found by an Internet title search.

Please feel free to share this information with others.  If you have questions or comments, please send them my way.

(22 May 2018): These Six Chinese Cities Dominate Global Electric-Vehicle SalesBloomberg.com

——–“After trying for to years to get a license for a gasoline-powered car in Beijing’s bimonthly lottery, Gary Zhong gave up and bought the Qin EV300 electric vehicle from Warren Buffett-backed BYD Co. . . . Zhong exemplifies the early success China is having with its push toward electric vehicles instead of gas guzzlers.”  Six Chinese cities have implemented gasoline-car restriction and they have “accounted for 40 percent of the nation’s electric-car sales of 579,000 last and—and 21 percent of the world’s EV sales.”  It can take years, and a hefty fee, to get a license for a gas-powered vehicle, whereas an “EV license is free and often can be obtained a lot faster.”  Additional “Chinese cities are set to add restrictions on fossil-fuel vehicles as the country fights air pollution and highway congestion.”

********It is hard to imagine people in the U.S. being willing to accept this approach to expanding EV sales.  Still, it indicates that the decisions people make depend upon their “out of pocket” outlays plus any additional costs they must bear.  By substantially increasing the additional costs that prospective gasoline-powered vehicle purchasers must bear, the Chinese cities in question—with more on the way—have made electric vehicles relatively more attractive, leading consumers to purchase more EVs.

(23 May 2018): [SR] “Market Players Envision Stock Exchange Powered by BlockchainThe Wall Street Journal

——–“As regulators crack down on the multibillion-dollar, fraud-tainted business of initial coin offerings [ICOs], some market operators are exploring ways to bring them in line with U.S. securities law.  This week, a U.S. options exchange backed by Canada’s TMX Group said it would team up with online retailer Overstock.com to create the first regulated exchanged for ‘security tokens,’ which are essentially digital versions of stocks.  Security tokens use blockchain, the technology behind bitcoin, to manage the transfer of the shares from one owner to another.  Unlike the tokens sold in many ICOs, they are designed to be compliant with Securities and Exchange Commission rules.  Only a few security tokens have been issued to date.”

********The article goes on to note that, “While the idea of the tokens is largely untested and exchange plan is far from gaining SEC approval, supporters say such tokens could transform the way startups raise money by allowing them to bypass venture-capital firms and effectively sell shares over the internet.”  Much has been written about Bitcoin and blockchain in the past but the possibility of replacing stocks by “security tokens” (and the potential transformation of stock exchanges) ensures that we are going to hear a lot about blockchain, stocks, and security tokens going forward.  As the CEO of Oversotck.com Patrick Byrne has commented, “The ICO craze is the world of the past . . . In the past three to six months, everybody understands it’s going towards security tokens.”

********So, I just set up an Alert using Google Scholar for the terms: blockchain, “security token”, and stock.  As items meeting these terms come up, I will be alerted.  You can learn how to set up such alerts for yourself by reading a post or watching a video.  A good tool to use if you are wanting to follow a topic as it evolves.

(23 May 2018): “U.S. bank regulator encourages banks to reconsider small-dollar lending” Reuters

——–The Office of the Comptroller of the Currency said Wednesday that “banks should consider offering more short-term, small-dollar loans, inviting the industry to engage in lending it had once actively discouraged. . . . The three-page bulletin from the OCC does not alter any existing regulations but makes clear an about-face at the national bank regulator.”  Short-term loans in the $300 to $5,000 range “are usually relied on by consumers to help cover short-term gaps in funds.”  Rules issued in 2013 resulted in few banks offering such loans, “leading borrowers in need of short-term lending or with a subpar credit history to seek out alternative options, like payday lenders.”

********The guidance offered by the OCC can be found here.  The Pew Charitable Trusts has a research project on small-dollar loans, including payday loans.  You can learn about the project here.  According to The New York Times, the new guidance is welcomed by Pew.  What remains is to coordinate the work of the OCC with that of the Consumer Financial Protection Bureau.

(24 May 2018): “Climate Change Warriors’ Latest Weapon of Choice Is Litigation” Bloomberg.com

——–“In the global fight against climate change, one tool is proving increasingly popular: litigation.  From California to the Philippines, activists, governments and concerned citizens ae suing the biggest polluters and national governments over the effects of climate change at a break-neck pace. . . . The wave of activity is about channeling the fervor of a social movement to drive change via the legal systems.  The arguments vary based on both culture and the law.”

********Although the argument is about climate change litigation, it is of far more general application that that.  The benefits and costs of any particular action necessarily depend upon the legal framework—a change in the legal framework will, more often than not, change the benefits, costs, and opportunities for gain.  Not earthshaking news, of course.  That is why lobbyists abound at the state and federal levels, and why groups like the American Legislative Exchange Council and the State Innovations Exchange exist.

——–While we are on the subject of climate change, The New York Times reports a “new study has found that rice exposed to elevated levels of carbon dioxide contains lower amounts of several important nutrients.  The potential health consequences are large, given that there are already billions of people around the world who don’t get enough protein, vitamins or other nutrients in their daily diet.”  Whereas previous studies have focused on crop quantity and climate change, this one encompasses crop quality.

(26 May 2018):How kidnapping insurance keeps a lid on ransom inflationThe Economist

——–“In the early 1970s, leftist guerrillas in Argentina discovered a lucrative new way to make money: kidnap millionaires.  Panicking firms would agree to huge ransoms, more concerned with freeing their executives than driving down the fee.  That was not just bad bur businesses.  It also became a textbook case of how poor negotiating can send future ransoms rocketing and attract new entrants to the kidnapping trade.”  The 1975 ransom of Jorge Born in Argentina for $60m, “$275m in today’s money, is the highest ransom known in modern times.  One reason it marked a high point is the spread of kidnapping-and-ransom (K&R) insurance.”

********Although insurers reimburse ransoms, they also provide “seasoned ‘crisis management’ experts to help with negotiations.”  The Danish movie “A Hijacking” provides a look at the ransom negotiations involving a ship pirated by Somalis in the Indian Ocean.  It is available as a DVD from Netflix.

(29 May 2018):The World Isn’t Prepared for RetirementBloomberg.com

——–A three-question test of basic financial concepts was given “as part of The Aegon Retirement Readiness Survey 2018.”  Many of the more than 14,000 people in 15 countries “failed the quiz, with big potential consequences for their future security.  Regarding the Survey, Catherine Collison, who is executive director of the Aegon Center for Longevity and Retirement, noted: “Across the board . . . workers didn’t seem to recognize the huge impact that basic changes in the labor force, technology and the climate will probably have on their retirement plans.”

********The three question test of basic financial concepts appears at the end of the article; the Retirement Readiness Survey 2018 (72 pages) is downloadable.  Catherine Collison is also the president of the nonprofit Transamerica Center for Retirement Studies.

May you have a good week!  Bruce

318 (23 May 2018)

Welcome to week 318!  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 may be found by an Internet title search.

Please feel free to share this information with others.  If you have questions or comments, please send them my way.

(14 May 2018): “An Ice Core Reveals the Economic Health of the Roman EmpireThe New York Times

——–“A year by year economic history of the Roman Empire might seem as impossible to reconstruct as the lost 107 books of Livy’s history of Rome.  Yet something close to such a record has now been retrieved from the unlikeliest of places—a glacier in central Greenland.  The record is written not in Latin but in lead.  Lead emissions generated by mining operations in Northern Europe reached Greenland and were washed down in snowfall.  the snow accumulated, turned into ice, and preserved a record that stretches back thousands of years.”  Although ice cores have long been used to track climate change, using ice cores to measure lead emissions as a proxy for economic activity is relatively new.

********Fascinating article.  Ice core researcher Joseph R. McConnell was able to develop a method for melting ice cores that yielded “12 measurement per year throughout the Roman era.”  The graph of the resulting time series “show a fluctuating line whose peaks and troughs correspond to salient events in Roman history.”  Every fluctuation provides an opportunity to ask questions and explore.  Who knows what other clues to economic activity lie deep down in glacial ice cores?

(18 May 2018): Moving to a Place Instead of a JobBloomberg.com

——–“Among the bold souls moving to new metropolitan areas, the online rental marketplace
Apartment List this week identified two distinct types:

  • Job-first movers refer to renters who applied for jobs in multiple cities, then picked a city based on job offers.
  • Location-first movers refer to renters who chose a city to live in before applying for jobs in that city.”

Generally speaking, job-first movers had a larger percentage of bachelor’s degrees or higher than location-first movers, but location-first movers tend to be more likely to remain in the community to which they moved than job-first movers.  Location-firsters, so it seems, “sound like the kind of people you want to attract to your metro area.  They’re going to stick around, raise families and knit themselves into the fabric of the community, not leave town when the next good job opportunity opens up.”

********As the article goes on to note, the last paragraph tends to oversimplify things.  I did find the distinction between the two types of movers to be interesting and potentially useful.  Research by Michael J. Hicks and Dagney Faulk cited in the article sought to answer the question “Do people follow jobs, or do jobs follow people?”  They concluded that although things were different in the 1970s, today it is generally true that jobs follow people.  Thus “policies that focus on relocating capital investment, in order to move people to jobs, will be ineffective.”

********There is an interesting related article at Bloomberg.com, “Why Do American’s Stay When Their Town Has No Future?”  The short answer is social connection but the article is far richer than the short answer or its title suggests.  The article is principally about the disruptions caused by the imminent closing of a coal-fired power plant in Adams County, Ohio; Adams County is about 70 miles southeast of Cincinnati and boarders the Ohio River.  There are many familiar features of the closure but there are some unique ones, too.  What especially caught my attention was that statement that although coal-fired utilities get less media than coal mines, they are “far more widespread . . . and are experiencing a much more immediate decline.  Whereas coal mines have been shedding jobs for decades, coal-fired plants are experiencing their biggest crisis right now.”

********Sometimes people choose not to move to a new job due to social and historical forces—the invisible handshake—but other times there are legal and political reasons—the invisible foot.  Noncompete clauses in employee contracts limit mobility, as discussed in The EconomistLawmakers are trying to curb contracts that make it harder to change jobs.”  A precis of the pros and cons of noncompete clauses is given in the leader connected to the article, which comes out strongly against them except in narrowly defined circumstances.  California is one of only three states to make noncompete “clauses unenforceable except in special circumstances, such as the sale of a business.”

(18 May 2018):The French Perfume BoomJSTOR Daily

——–“Near the end of the nineteenth century, economist Thorstein Veblen came up with the idea of conspicuous consumption.  Coincidentally (or maybe not), around this time French perfumers mastered the art of selling an inexpensively-produced product as a symbol of decadent luxury.  In fact, historian Eugénie Briot points out the marketing of scents through clever branding, rather than real differences in what’s being sold, originated in nineteenth-century France.”

********As the article notes, the industrialization of perfume making first tended to lower the cost of perfume, making it accessible to “the humble classes.”  To keep prices high, and to boost brand cachet, a variety of tactics were employed, “including displaying them [perfumes] in fancy boutiques and using elaborate packaging.  And in a move echoed today in ‘sponsored content’ stories on news sites, high-end perfumers also placed ads disguised as society gossip columns in which high-society ladies praised their products.”

(18 May 2018): “Bags of Cash and Stealthy Deliveries: How Pot Start-Ups Pay Taxes” The New York Times

——–Although 30 states have legalized marijuana for “medicinal or recreational use,” the businesses involved in selling them “find themselves without access to banks to provide them with loans or checking accounts.”  This has resulted in a “cash economy” with people making “monthly and annual tax payments in hard currency instead of with checks or electronic transfers.”  For Charity Gates in Denver, Colorado, this involves “collecting stacks of $20 bills she has stored in various safes . . . She counts the cash and places it in small duffel or sling bags, carrying up to $20,000 at a time.”  She then drives to a building downtown, being sure to vary her routes to avoid being robbed.  Eventually she “walks into a room and hands her bags to a group of people waiting to run her money through counting and counterfeit-detection machines.  This is how she pays her taxes.”

********This seems to be an issue relating to federally chartered banks, as the article goes on to note that some “credit unions and small banks that are chartered by their state, not the federal government, have tried to fill the void by offering basic banking services to the cannabis industry.”  Clearly this as “opportunity for gain” that is just waiting for the right entrepreneur to make the right connections.  Perhaps artificial intelligence will provide a way to help realize those gains in the not-too-distant future.  The May 21st edition of Bloomberg Businessweek devotes about 30 pages to AI in a section titled “Sooner Than You Think.”

(18 May 2018):The World Is Heating Up, But Not Everyone Is Staying CoolBloomberg.com

********A relatively concise article examining the vicious circle involving energy use, climate change, and air conditioning.  The inset text is from the article.

Climate change is raising atmospheric temperatures, directly increasing the need for cooling, which is resulting in more burning of fossil fuels in power stations to meet the increased electricity load, which is contributing, in turn, to more climate change. Breaking this circle ultimately hinges on arresting climate change; that will require curbing the amount of energy used for cooling and for other end uses, as well as decarbonising the energy mix.

This is just the type of problem that system dynamics was developed to explore.

(20 May 2018):A Booming Economy With a Tragic PriceThe New York Times

——–“James Guy had been a dairy farmer since he was 15, and at 55, he thought he’d be preparing for retirement.  Instead he struggled to make the payments on a bank loan after the price of milk fell and never recovered.  One night in November 2016, his wife, Mary, who was working part-time as a nurse to help make ends meet, came home to find he had hanged himself.”  She said, “When a farmer is looking down the barrel of having to sell his farm or lose his farm or give up the profession he’d done all his life, it’s devastating . . . They just lose their identity.”  As a whole, “people living in remote Australia now take their own lives at twice the rate of those in the city.”  In remote areas of the state of Queensland, “the suicide rate for farmers was up to five times that of nonfarmers.”  But “the problem of rural suicides is not unique to Australia.  Countries as diverse as India and France also face problems of farmers killing themselves.”

********The article goes on to note that the causes of the suicide crisis of rural Australia vary.  “Some farming areas have been pummeled by drought, which many blame on global warming. . . . But economists and mental health experts say a common thread is the changes unleashed by a globalizing economy.”  The common threads of climate change and globalization stand out, as does the fact that in rural Australia, at least, “the majority of farmers are men, who are expected to display an image of rugged individualism. . . . The problem is compounded by the difficulty of getting help.  With just a small number of mental health centers and trained professionals scattered across Australia’s vast rural areas, residents are only able to access mental health services at a fifth of the rate of city dwellers.”  All of this leaves me thinking about the rural areas in the U.S., one of which is where I live.

(22 May 2018):Coffee Waste Is Now Fetching a 480% Premium Over Coffee ItselfBloomburg.com

——–“Aida Batlle grows coffee on her family’s farm in the hills surrounding El Salvador’s Santa Ana Volcano.  Like generations before her, she had little use for the skin that encases the beans, so she’d turn it into cheap fertilizer or, more frequently, trash it.  then one day, walking past some husks drying in the sun, a smell hit her, a good smell: hibiscus and other floral aromas.  It dawned on her, she says, that some value might be extracted from what she had long considered refuse. . . More than a decade later, coffee husk—or, as it’s better known, cascara—is having a moment.”  Thanks to the demand of chains like Starbucks, Batlle “gets $7 for a pound of cascara, while the average price for coffee hovers around $1.20.”

********Stumptown Coffee Roasters has a nice post, with lovely illustrations, on cascara.  The production of cascara is still quite small, and the product is, as the French would say, dans le vent, i.e., fashionable.  Will that fashionableness remain if and when production ramps up?  Coffee retailers are asking themselves that question.  This is a nice example of the origin of an idea and the time necessary to realize it in the market.

May you have a good week!  Bruce

317 (16 May 2018)

Welcome to week 317!  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 may be found by an Internet title search.

Please feel free to share this information with others.  If you have questions or comments, please send them my way.

(5 May 2018): New Orleans News Site Finds Actors Were Paid To Support A Power Plantnpr.org

——–“Multiple actors were paid to appear at City Hall meetings in New Orleans and express support for a proposed gas-powered power plant, an investigative news site reports, citing interviews with actors and messages with organizers.”  The news site is “The Lens.”  It has published evidence “suggesting a campaign to recruit, organize and pay people, including people from outside on New Orleans, to express support for the power plant.  The Lens notes that “the practice appears to be legal.”  According to The Lens, “participants were paid $60 for showing up and wearing a shirt, and $200 for delivering a speech in support of the plant.  The news outlet also said that in one message, the organizer referenced ‘Crowds on Demand.’  In 2016, Dave Rothbart wrote about that company, which supplies fake crowds for events, for The California Report.”

********Here is the link to the foundational article in “The Lens” and here is the link to the website of Crowds on Demand.  The website of Crowds on Demand draws attention to its services in the areas of Celebrity Events, Protests, Rallies And Advocacy, and Corporate Events And Audiences.  The event in New Orleans falls squarely in Protest services and the link for “The Lens” seems to provide a good illustration of that service in action.  All of this is another clear example of the many ways that human behavior expresses itself on “the market” broadly considered.  In an update on May 10th, “The Lens” reports that the energy company “Entergy has acknowledged that a public-relations firm working on its behalf was responsible for paying people to attend and speak at two public meetings in support of a new power plant in New Orleans.  The company said it hired the PR firm to bring supporters to the meetings, but it didn’t know those people had been paid.”

(10 May 2018):Canadian newsprint tariffs start to take a toll on U.S. newspaper industry The Los Angeles Times

——–“Little noticed amid the trade war discussion, tariffs levied by the Trump administration on the Canadian paper used to make newsprint are starting to take a toll on U.S. newspapers and printers.”  Two sets of interventions “have raised the price of newsprint by about 30%.”  As a result, the “Tampa Bay Times said it will eliminate about 50 jobs by June to try to manage the estimated $3.5-million additional cost the paper will pay per year as a result of the tariffs.”  According to Paul Boyle of News Media Alliance, there were about 15 newsprint mills in the U.S., but the mills began disappearing as the demand for newsprint declined.  Now “there are only a handful left in the nation.”  Canadian paper mills provide 60% of the 2.4 million tons of newsprint in the U.S.  Boyle notes, “I think it’s foolish to believe someone’s going to start a newsprint mill and spend $200 million to $300 million to build a mill . . . when you see a decline in newsprint.”

********It is always good to have specific examples to look at when examining the impact of a policy which, by its nature, must be general.  Here, tariffs (invisible foot) on Canadian newsprint reduce the supply of newsprint in the U.S. and drive up the price of newsprint (invisible hand).  In the short run and, if we are to believe Paul Boyle, the long run there will be little supply response by U.S. newsprint producers due to the tariff.  The higher price of newsprint decreases the supply (and increases the prices) of products that use newsprint, especially newspapers.  This makes newspapers relatively more expensive than alternatives like online media, decreasing the demand for those who produce newspapers in their traditional form.  This is only a glimpse of the ramifications.

********I’m currently reading You Had a Job for Life: Story of a Company Town, by Jamie Sayen.  It is a history, based upon oral histories, of a paper mill in Groveton, New Hampshire, not too far from the Canadian border.  The book has kept my attention and, in its later stages, has shown the challenges that arise for a company town when it loses its connection to local ownership and becomes just another unit to be managed by a larger business.  (I would be grateful to anyone who could point me in the direction of a good history of the paper mill in Canton, North Carolina, which has also had multiple owners.)  On that reading trajectory, I am looking to read for my next book Annie Proulx’s novel Barkskins, which follows the families of two wood cutters over 300 years.  I became aware of this book via a review of The Overstory, by Richard Powers, another novel about trees and the people who relate to them.  Maybe I’ll read both.

(10 May 2018):Bans on paying for human blood distort a vital global marketThe Economist

——–“The global demand for plasma is growing, and cannot be met through altruistic donations alone.  Global plasma exports were worth $126bn in 2016—more than exports of aeroplanes.  But paid plasma raises ethical, social and medical concerns: that it will lead to health catastrophes, as in the 1980s when tainted blood spread HIV and hepatitis; that it exploits the poor; and that it reduces the supply of ‘whole’ blood, which is almost all donated voluntarily.  None of these worries is well-founded.”

********The article goes on to elaborate upon why these worries are not well founded.  It turns out that plasma can be highly processed and checked for purity in a way that whole blood cannot.  Still, many countries tend to treat plasma like whole blood and ban payment for plasma.  The U.S. does not, and that is why it is responsible why it collects three-quarters of global blood plasma.  Unsurprisingly, countries that pay for plasma tend to be exporters while countries that ban pay for plasma tend to be importers.  A surprising fact: “plasma makes up 1.6% of America’s total goods exports.”

********There is a good deal of academic literature on the market for blood.  An accessible article is “The Market for BloodThe Journal of Economic Perspectives (2014).

(11 May 2018): [SR] “Maryland’s Crab Country: Not Enough Visas, Not Enough WorkersThe Wall Street Journal

——–In Fishing Creek, Maryland, on Hoopers Island, 21 Mexican women at G.W. Hall & Sons are cracking open steamed crabs that will be processed and sold to wholesalers in the mid-Atlantic states and as far away as Canada.  Just one-half mile away, “the picking room at a competing company, Russell Hall Seafood, was silent, no workers to be seen. . . . The difference: one firm won the visa lottery, and the other didn’t.  This year, for the first time, demand for the low-skilled, seasonal H-2B visas was so high that the U.S. government awarded them by lottery.”  The worker shortage on Hoopers Island was unexpected and has disrupted its economy.  “Processors that don’t have pickers aren’t buying crabs.  Those crabbers aren’t buying bait fish from local fishermen.  The combination has slashed sales at the Hoopers Island General Store to its lowest level in six years, said owner Katie Doll.”  Fisherman Burl Lewis “recently laid off a crew member from his 52-foot boat,” noting “The Mexican labor creates jobs for Americans.  It’s creating my job.”

********Another clear illustration of the invisible foot—legal and political forces that influence human behavior—in action.  In addition, it shows how a change at one part of a supply chain are transmitted to its other parts and beyond, i.e., it illustrates multiplier effects.  It strikes me that that the lottery approach to allocating H-2B visas would strike many as being fair but inefficient, whereas as market approach to visa allocation would strike many as being unfair but efficient.  Fairness and efficiency are important considerations in all policy decisions.

********While we are on the subject of lotteries as an allocation method, it is used to allocate affordable housing, too.  Check out “These 95 Apartments Promised Affordable Rent in San Francisco.  Then 6,580 People Applied The New York Times.

(13 May 2018):Atlantic City’s Grand Casino BustJSTOR Daily

——–“On May 26th, 1978, a grand social experiment began in Atlantic City, New Jersey.  the first legal American casino not located in Nevada opened, less than two years after New Jersey voters approved a referendum to allow gambling in the battered resort community.”  Gambling supporters saw casinos as a way “to boost the economy and create jobs.  Moralists argued that casinos would erode the country’s moral fiber.  But the jobs argument won out, and by the 1990s, casinos were seemingly everywhere.”  It was anticipated that casino gambling would increase tax revenues for states, but the “concept was based on a false hope.  The original gambling mecca, Las Vegas, was an isolated locale that became a tourist destination.  Its imitators, including Atlantic City, relied on locals and day hoppers, who play at the casinos and then go home, contributing few outside tourist dollars to their localities.  In Atlantic City, a third of that town’s local businesses closed within four years of the casino openings.”

********This post shows all of the invisible forces in action.  It also connects with the two articles immediately above.  First, it provides a look at yet another example of probability-related activity.  Second, and more interestingly, it shows that the economic impact difference of casino gambling between Las Vegas and Atlantic City relates to the size of their multipliers—relatively large if most spending comes from outside the community and relatively small if it comes from inside the community.  (Where economic development is concerned, bigger is better.)  In the latter case, gambling money would likely have been spent locally anyway, so there is simply a redistribution of expenditures, which is why so many local businesses closed in Atlantic City after casinos were introduced.  In the former case the additional expenditures are all new.

********It will be interesting to see how state governments respond to the recent decision by the U.S. Supreme Court to allow sports gambling.  States must still act, however, and it is possible that the federal government will, too.  What arguments will be made and to what extent do those arguments lie upon factual grounds rather than wishful thinking?  It shouldn’t be long before we find out.

May you have a good week!  Bruce

316 (9 May 2018)

Welcome to week 316!  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 may be found by an Internet title search.

Please feel free to share this information with others.  If you have questions or comments, please send them my way.

(2 May 2018): America’s Last-Ditch Climate Strategy of Retreat Isn’t Going So WellBloomberg.com

——–The village of Sidney, New York flooded in 2006 and 2011.  After the second flood, its mayor, Andrew Matviak, recognized that “we can’t operate the way we’ve operated before and say it’s not going to happen again.”  What they have tried to do is engage what is known as “managed retreat” from flood exposure.  This contrasts with what has been “the guiding philosophy behind attempts to protect U.S. homes and cities against the effect of climate change . . . to build more defenses.  Houses can be perched on stilts, surrounded by barriers, buttressed with stormproof windows and roofs.”  With managed retreat the approach is to move out of harm’s way.  In Sidney the idea was to move impacted homes and neighborhoods out of the current flood plane and to higher ground, paying residents for the flood-damaged homes they had.  But this has proven hard to do with a set of hard-to-navigate state and federal agencies to deal with.

********I appreciated the contrast between defense in the face of climate change and managed retreat.  Given the very long time lags involved in action and result regarding climate, one or both of these approaches to “managing” climate change will likely be adopted.  Of course, in some places defense is not really an option due to natural forces.  In other places, so Sidney’s case seems, managed retreat is strongly affected by the invisible foot, i.e., legal and political forces.  By the way, there is another option regarding climate change: do nothing.  This seems to be the approach of Greenland, which is welcoming climate change as a way to make its environs more accessible to tourists and miners.  There is a brief article to this effect in The Economist.

(2 May 2018):Why farmers only get 7.8 cents of every dollar Americans spend on foodThe Washington Post

——–“For every dollar consumers spend on food, only 7.8 cents goes to farmers—a record low that reflects shifts in how Americans eat, according to the Department of Agriculture.  Where once consumers cooked most of their meals at home, they’re now buying just as many at cafes and restaurants.  And while shoppers were once content to husk their own corn and slice their own apples, they now buy those foods—and thousands of others—pre-husked, pre-sliced and otherwise processed. . . . While falling share doesn’t hurt farmers, necessarily, it does expose the long-term, macro trends that shape the supply and cost of food.”

********What I found especially interesting in this article is the bar graph titled “Where your grocery money actually goes” that shows the composition of “every dollar spent on food.”   Leading the way in terms of the share of each food dollar are Food services (36.3 cents) and Food processing (15.2 cents), followed by Retail trade (12.4 cents) and Wholesale trade (9.1 cents).  What I would really like to see is a so-called “Percentage stacked area chart” for the share of each food dollar over time.  One really can’t begin to tell a story with only one datum.

(4 May 2018):Can Markets Make Us Equal?Bloomberg.com

——–“Proposed solutions for inequality are depressingly familiar. . . . Doesn’t anybody have anything new to offer?  Actually, yes: One big new idea is to unleash the awesome power of markets and push them into parts of life where they have never operated before. . . . Taking markets more seriously is the thrust of a surprising book, Radical Markets: Uprooting Capitalism and Democracy for a Just Society . . . It’s be Eric Posner, a University of Chicago Law School professor, and Glen Weyl, an economist and principal researcher at Microsoft Corp.  They’re smart and iconoclastic, and their book bursts with ideas like kernels of corn on a hot stove.”

********This post is a review, by Peter McCoy, of Radical Markets.  As the reviewer notes, some of the ideas in the book are impossible, offensive, or both.  But that seems not to concern the Posner and Weyl.  For example, the authors suggest that people be allowed to “decide how much they want to pay in property taxes by setting their own valuations for their property.  Every kind of property, not just real estate.”  Read the article to see how this would work.  Suffice it to say that this book seems to have some unusual ideas that are sure to stretch one’s mind.

********For an earlier opinion piece by the authors, which appeared in The New York Times, see “The Real Villain Behind Our New Gilded Age.”  In contrast to the review by McCoy, Posner and Weyl focus primarily on the role of market (monopoly) power in current times.  As such they hark back to the regulatory responses to the great monopolies of the late 19th century, in particular “Standard Oil, the sugar trust, [and] the financial and railroad interests” that used “their power to corrupt the economy and politics.”  As they say, “Today, market power takes new forms, but the solution is the same: antimonopoly laws and laws protecting workers, but updated for the problems of the 21st century.”  Posner and Weyl also have some things to say about the current state of academic economics.  Read them in “How Economists Became So TimidThe Chronicle of Higher Education.

********Eric Posner is the son of Richard Posner, who was recently recognized as a Distinguished Fellow of the American Economic Association.  According to the citation, “Richard Posner is the most significant pioneer in the economic analysis of law.”  From 1981 to 2017 he was a federal circuit court judge.  Posner wrote prolifically throughout his career.  “His treatise/textbook Economic Analysis of Law, published in 1973 and now in its ninth edition (2014), has provided generations of law students, economics students, and lawyers who had not studied economics, the frameworks and methods for applying economic analysis to all major legal domains.”

(4 May 2018): [SR] “Why Not All Tolls Rise to Nearly $50The Wall Street Journal

——–“States are increasingly turning to a free-market solution for highway congestion, putting in demand-based tolls that rise in price as traffic builds.”  Although the goal is to differentiate between those willing to pay for more speed and those who aren’t, there is a hitch.  “Some places like Los Angeles and Miami have put caps on tolls to spare drivers potential sticker shock.  Such price limits make jams more likely in express lanes, eroding their efficacy and prompting driver complaints.  Without a cap, tolls on a 9-mile stretch in Virginia have almost hit $50.”

********Evidently there are “now more than 30 such [demand-based toll] roadways in the U.S., most with a cap, and 13 others where tolls vary by time of day.”  Nobel laureate William Vickrey (1914-1996) is the originator of what is now called “congestion pricing.”  The Tri-State Transportation Campaign has a 12-page summary of the congestion pricing experiences of London, Singapore, and Stockholm.  All this will sound familiar to those who have followed the news about the “surge pricing” of Uber and others.

(4 May 2018):A healthy re-examination of free trade’s benefits and shocksThe Economist

——–“Economists have long argued that free trade makes everyone richer.  But lately that view has come under attack.”  As a result, economists are now “asking themselves some tough questions.  Is free trade always a good thing?  Do the losers from free trade need to be compensated?  To explore the basics of free trade, The Economist spoke to John Van Reenen an economist at MIT.”  According to Van Reenen, free trade as “four big benefits” and some “well-known downsides.”

********Van Reenen provides brief and clear discussions of the benefits and downsides of free trade, which he defines as “allowing good[s] and services to move as freely as possible across different countries.”  One of the things that stood out for me in the article is Van Reenen’s discussion of what a country can do to “compensate those people who do lose out” from free trade.  The absence of a meaningful social safety net in the U.S. means that compensating losers from trade is more challenging than in some European countries.

(9 May 2018):When All Else Fails, Tax Incentives Probably Will, TooThe New York Times

——–The state of Wisconsin has offered $3 billion to Foxconn to bring a $10 billion television plant to Racine and New Jersey has offered $5 billion to Amazon to bring its second headquarters to Newark.  “Giveaways like these are often a waste of public money.  Research on a program of corporate tax breaks in Texas found that 85 to 90 percent of the projects benefiting from such incentives would have gone forward without them.  Even when tax breaks work and spawn new jobs, local residents gain little if anything.”

*******Eduardo Porter, the columnist who wrote this article, goes on to ask, “So why does everybody do it?”  I.e., why do states (and regions) pursue policies that, on the face to things, deliver few if any (net) benefits to the people politicians represent?  Porter explores many facets of these questions, and while doing so he provides links to a variety of resources that can be easily consulted for those who wish to learn more.  Certainly, one aspect of this is the time horizons of most politicians tend to be relatively short while the time horizons for most economically evolutionary projects tend to be long.  This is a familiar story, except that instead of talking about corporate management tied to short-run financial results, we are confronted with politicians tied to short-run political results.  Real development, economic or other, takes time.

May you have a good week!  Bruce