Welcome to week 208! This completes the fourth year of The Invisible Forces Weekly. In recognition of year five, next week and subsequently TIF Weekly will be distributed from a new address: firstname.lastname@example.org. This is in anticipation of my retirement (on June 30th) from UNC Asheville after thirty-two years of teaching and learning. I am looking forward to having more time to read, reflect, and write about current events employing economics with a broader view. Thanks for your continued interest!
The articles below caught my attention this week. Please note that what are intended to be relatively objective “briefs” are preceded by dashes (——–), whereas additional material or relatively subjective comments are preceded by asterisks (********). The links to articles preceded by [SR] require a subscription to be read in their entirety, although complete articles may frequently be found by a title search.
You can find a pdf of this issue, a cumulative pdf for issues 1-156, and a cumulative pdf for issues 157-present at: https://sites.google.com/site/brucedeanlarson/the-invisible-forces.
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(10 April 2015): “Lynda.com: A 60-Year-Old Earns Internet Glory” (http://www.wsj.com/articles/lynda-com-a-60-year-old-earns-internet-glory-1428625176)
——–“At a time when some of the biggest deals in technology make overnight billionaires out of 20-something startup founders, the story of Lynda Weinman’s success may come as a welcome counterweight. A ‘mother of the Internet’ and author of some of the earliest books on Web design, Ms. Weinman has spent two decades teaching scores of would-be Web experts through lynda.com, the e-learning site she co-founded with her husband, Bruce Heavin, in 1995. With the Thursday sale of lynda.com, which “now offers courses in design, technology and business” to LinkedIn for $1.5 billion, Lynda Weinman is “one of the most successful entrepreneurs in e-learning.” Prior to starting lynda.com, Ms. Weinman “worked as a special-effects animator with credits for RoboCop 2 and Bill & Ted’s Excellent Adventure, and as a professor of the nascent field of digital design at Art Center.” It was at Art Center that “she discovered a knack for teaching.” Betsy Corcoran, the CEO of EdSurge, “an information resource on educational technology” notes that “Lynda.com was ed tech before ed tech was cool.”
********It is obvious from the article that the users of lynda.com have a real affection for the site and Lynda Weinman. It seems that she succeeded where other educational technology have not because she was focused on helping students learn through the use of technology, whereas others have been focused on using technology to make a profit.
(11 April 2015): “Drought in California: The price is wrong” (http://www.economist.com/news/united-states/21647994-why-golden-state-so-bad-managing-water-price-wrong)
——“California is no longer taking a laid-back approach to drought. On April 1st, for the first time, the golden State imposed mandatory curbs on water use. . . . [Governor Jerry] Brown put his foot on urban hosepipes while letting farmers carry on merrily wasting water, for which they pay far less than urbanites.” Critics point to the asymmetry in addressing the state’s approach to the drought, claiming that “California cannot solve its water crisis without pricing the stuff properly and dealing with those who consume the most.” Excluding water reserved for environmental purposes, “Agriculture sucks up about 80% of the state’s water.” In defending his decision to take it easy on farmers, Brown said that “many of them are ‘really suffering’ . . . because of the water shortage.
********Resource pricing is always an issue and economic, as well as social, development takes place in relation to historical and prospective prices. The almond groves of California would today be considerably smaller and the almond milk I drink would likely be more expensive if water destined for agricultural purposes in California would have been priced higher. Pricing of water in the West, of course, has long been driven by legal and political forces, i.e., the invisible foot. The article has a slider that shows the spread and deepening of the drought from Kansas to California from April 1st 2014 to March 31st 2015.
(11 April 2015): “Schumpeter: Retail religion” (http://www.economist.com/news/business/21647976-robert-schuller-entrepreneur-televangelism-and-megachurches-died-april-2nd-retail)
——–On April 2nd Robert Schuller, of Crystal Cathedral fame, passed away. “Dressed in flowing, purple robes Dr Schuller, as he always called himself, preached the Word not just to the 3,000-strong congregation (with another 3,000 waiting for the second shift) but also to millions watching on television.” Schuller “was the leading example of a very American reed of businessperson: the pastorpreneur. He succeeded by applying the principles of business to religion. However, in his later years, a religious empire that had grown huge by embracing economies of scale and customer focus fell victim to two familiar causes of business failure: poor succession planning, and a failure to react to dynamic new competitors.” The key to Schuller’s success was “his relentless customer focus.”
********An interesting term, ‘pastorpreneur’. Schuller began broadcasting “Hour of Power” in 1970, a program that reached an audience of 20 million viewers in about 180 countries at its peak. In 2010 the Crystal Cathedral was sold to the Roman Catholic diocese of Orange.
(11 April 2015): “Appalachian Communities Scraping By as Coal Taxes Drop” [SR](http://www.wsj.com/articles/appalachian-communities-scraping-by-as-coal-taxes-drop-1428696029)
——–“Just three years ago, Nicholas County in West Virginia had eight working mines and took in $1.2 million from coal-related tax revenue. Today, just one mine is still churning out coal.” In 2014 the “county’s share of state taxes on coal mining, partly based on local production and county population, plummeted to about $100,000.” As a result, the county recently laid off “20 employees, including four police officers, meaning there won’t be any officers on duty after 4 p.m. . . . An additional 74 employees will take a 20% pay cut.” According to Mark Muchow of the West Virginia Department of Revenue, “Absent the coal industry, the economy in those [coal-producing] areas isn’t large enough to support the populations . . . There’s going to be a period of serious adjustment.”
********So-called severance taxes figures prominently in the article. These result when a resource is extracted or “severed” from the ground. Such taxes exist for a variety of resources, including coal and natural gas (http://en.wikipedia.org/wiki/Severance_tax). Interestingly, the coal-severance tax yielded $531.1 in the 2012 fiscal year, falling to $407.1 million in 2014. At the same time, natural-gas severance taxes yielded $91.1 million in the 2012 fiscal year, rising to $206 million in 2014. Thus the increase in natural-gas severance taxes almost matched the decrease in the coal-severance taxes. There are many different severance taxes in existence, including salmon, timber, and oysters, among others. You can see an extensive list at: http://www.ncsl.org/research/fiscal-policy/state-energy-revenues-update.aspx.
********In a related article, the role of land reclamation costs and coal production are explored: “Appalachian Miners Wiped Out by Coal Glut That They Can’t Reverse” (http://www.bloomberg.com/news/articles/2015-03-30/appalachia-miners-wiped-out-by-coal-glut-that-they-can-t-reverse). The gist of the article is that the 1977 Surface Mining Control and Reclamation Act (SMCRA) requires companies to return the land around closed mines to their original states. As a result, some producers continue to produce at a loss rather than shut down the mine and incur extensive shut-down costs. You can learn more about SMCRA at: http://en.wikipedia.org/wiki/Surface_Mining_Control_and_Reclamation_Act_of_1977.
(12 April 2015): “Why a Harvard Professor Has Mixed Feelings When Students Take Jobs in Finance” (http://www.nytimes.com/2015/04/12/upshot/why-a-harvard-professor-has-mixed-feelings-when-students-take-jobs-in-finance.html)
********Harvard professor Sendhil Mullainathan ponders the private and social returns of the work Harvard graduates will do in their jobs, especially those taking jobs in finance, as one out of two economics majors will take. He notes: “As an economist, I look at it this way: Every profession produces both private returns—the fruits of labor that a person enjoys—and social returns—those that society enjoys. . . . People in some professions provide a surplus of social returns.” Inventors, teachers, and nonprofit workers are some examples. But it is a general phenomenon, one noted by Adam Smith in his discussion of the division of labor. But, as noted in the work of economists Kevin M. Murphy, Robert W. Vishny, and Andrei Shleifer, “countries suffer when talented people become what we economists call ‘rent seekers.’ Instead of creating wealth, rent seekers simply transfer it—from others to themselves. . . . In this respect, finance is a vexing industry.” Although some areas of it seem to be largely related to rent seeking, there are others, especially those that lend to the poor, that can benefit greatly from the “idealism and inventiveness” of youth.
(13 April 2015): “How 3-D Printing Is Going Out of This World” (http://www.wsj.com/articles/how-3-d-printing-is-going-out-of-this-world-1428873155)
——–[This is the A-Hed (quirky) article.] With more attention being given to travel to Mars, 3-D printing is being seen as a way of producing articles from local materials—sand—at a time when “The nearest Home Depot will be 140 million miles away.” Niki Werkheiser and her team at NASA’s Marshall Space Flight Center at Huntsville, Alabama are “starting to print curved walls and other structures using imitation Martian sand as an ink.” Meanwhile, “Engineers at the European Space Agency are exploring ways to use lunar dust as an ink to print out an entire moon base.” Indeed, “if astronauts ever do attempt to reach Mars, they may survive the journey by eating pizza made with a 3-D printed food system for long duration space missions.”
********The article is accompanied by a three-minute video. The first 3-D tool to be printed in space, in December, was a ratchet wrench. This article opened up new perspectives on 3-D printing for me.
(15 April 2015): “Today’s Personality Tests Raise the Bar for Job Seekers” (http://www.wsj.com/articles/a-personality-test-could-stand-in-the-way-of-your-next-job-1429065001)
——–“Pre-hire assessments have been used for years, but never have such tests been deployed so widely at companies across the U.S. The automation of the job application process, combined with powerful data tools and inexpensive online software, have led to falling costs, more accurate results and a surge in use. Eight of the top 10 U.S. private employers now administer pre-hire tests in their job applications for some positions. These tests have, in effect, raised the bar for U.S. job seekers: With more companies holding an alleged formula for workplace success, fewer are willing to take a chance on anyone who doesn’t measure up.” According to Jay Dorio, a developer of assessment tools for IBM’s Smarter Workforce initiative, “Employers are figuring out how their top employees do their jobs and are using that information to screen new hires.”
********The article is accompanied by a four-minute video with its reporter. Some employers, at least, have experienced marked reductions in turnover and hiring as a result of using the tests. Would methods such as these help increase retention and graduation rates for colleges and universities? If so, should they be used? I can’t help but think of the notion of “lock in” which suggests that the embrace of a particular way of doing things—particular people to do given work—may restrict options later on. You can learn more about lock in at: http://en.wikipedia.org/wiki/Lock-in_%28decision-making%29.
May you have a good week!