220 (8 July 2015)

Welcome to week 220!  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 1-208, and a cumulative pdf for issues 209-present at: https://sites.google.com/site/brucedeanlarson/the-invisible-forces.

(20 June 2015): “Six Hundred Years of Government Intervention in the Labor Markets” (http://daily.jstor.org/six-hundred-years-of-government-intervention-in-the-labor-markets/)

——–“When we talk about government intervention in the labor market, we often picture a steady growth in regulation, from elimination of child labor to the $15 an hour minimum wage being instituted in Los Angeles.  In a 1943 Columbia Law Review paper, Harvard law professor E. Merrick Dodd argues that the laissez-faire era in the nineteenth century represented just a brief blip in a long history of powerful labor regulations in England and the U.S.”

********This story appeared in JSTOR Daily, which provides summaries of journal articles with contemporary relevance, as this surely is given recent discussions and proposals relating to job classification and overtime pay.  Evidently the “blip” extended from 1825 to 1847.  The article provides a link to the downloadable 44-page paper.

(2 July 2015): “If You Fancy a Romantic Ride on a Gondola, You Can Have It . . . in Omaha” (http://www.wsj.com/articles/SB10275673379634644280204581078232924979372)

——–[This is the A-Hed (quirky) article.]  Visitors to Omaha, Nebraska once feasted on steak or drove past the home of billionaire Warren Buffet.  But now there is a new attraction—gondola rides.  A thirty-minute gondola ride on the 15-acre lake of the Heartland of America Park is a frequent source of marriage proposals, about 150 of them according to 62-year-old Steven Anderson, who runs a company boasting a 32-foot boat with many authentic Venetian details.  “He is hardly alone in efforts to spread the romance of the gondola.  In recent years, gondoliers in dozens of U.S. cities have established operations, promising passengers they can experience the best of Italy minus the jet lag.”  Genuine (asymmetric) Venetian gondolas cost about $20,000-plus to purchase, although at least one U.S. craftsmen has built one for $10,000.

********The article is accompanied by a two-minute video showing the Omaha gondolier.  Greg Mohr, the president of the Gondola Society of America, has a blog on all things gondola, including a list of gondola operations in America.  You can see it at: http://www.gondolagreg.com/2015_07_01_archive.html.

(2 July 2015): “Snow Drought Saps Washington State’s Economy” [SR](http://www.wsj.com/articles/snow-drought-saps-washington-states-economy-1435801630)

——–This year the Olympic Mountains of Washington State “recorded virtually no snow in all but the highest peaks.  The May 1 reading of zero snowpack in the rugged range northwest of Seattle was the lowest since records there began in 1948, and came as statewide snow accumulations totaled a paltry 16% of normal. . . . The state received plenty of precipitation but it came largely as rain because air temperatures were as much as 7 degrees Fahrenheit higher than normal.  The resulting lack of snow presents a real problem. . . . While the ample rainfall has filled the reservoirs of larger cities, many agriculture and rural areas are more reliant on water from streams and rivers to get through the dry summer months.  Less melting snow to feed the streams means less runoff for those communities.”

********I was struck by the importance of the snow pack for different types of water users in Washington.  It seems that it functions somewhat like storage batteries for electricity, reducing the fluctuation of water over time.  Cities have their reservoirs, as the article notes, but those in the countryside (and salmon) are dependent upon the buffering provided by the snow pack.  So, the total amount of precipitation is important, but the form of that participation is, too, especially where higher elevations (and lower ambient temperatures) are concerned.

(3 July 2015): “First Offshore Wind Farm in U.S. Powers Ahead” [SR](http://www.wsj.com/articles/first-offshore-wind-farm-in-u-s-powers-ahead-1435878845)

——–Block Island, Rhode Island is slated to become the nation’s first offshore wind farm; Europe has had wind farms “for more than two decades.”  Although the process for it began after the better known and larger Cape Wind project off Cape Cod in Massachusetts, it did not have the same formidable opponents: late Senator Ted Kenney and industrialist William Koch.  The project is “fully financed and permitted, and workers are expected to begin anchoring steel foundations to the ocean floor later this month.”  Once operational, the project will produce more than enough electricity for Block Island and allow some to be sent to the onshore grid by a $107 million undersea power cable.  Currently the island “relies on generators burning about 1 million gallons of expensive diesel fuel a year for power.”  Island residents will see about a 30% decline in their power bills as a result of the wind farm, while the bills of those on the mainland will increase due to the higher price of wind farm electricity.

********According to the American Wind Energy Association (http://www.awea.org/), “there are 11 [wind] projects in 10 states in various stages of development.”  The role of political and economic power in relation to the Cape Wind project is noteworthy.  That project, still unresolved, has been going on for 14 years.  “A contract dispute with local utilities” has thrown the project into question.

********This article connects up nicely with one in last week’s TIF Weekly that related to solar power and the Hawaiian islands.  The connections are renewable energy, islands, and nonrenewable energy.  Islands have special circumstances with regard to energy use as they tend not to have nonrenewable energy sources.  Thus the use of nonrenewables tends to be unusually expensive due to transportation costs.  Thus on both the Hawaiian islands and Block Island, the relative price of renewables is low and the argument for using them is stronger, and the choice of energy source, sun for the Hawaiian islands and wind for Block Island, seems obvious.  While searching for something else, I came upon one journal article (2004) that seems to deal with the topic directly, “On the economics of electricity consumption in small island developing states: a role for energy technologies?”  You can learn more about it at: http://www.sciencedirect.com/science/article/pii/S0301421503000478.

********Islands, as an abstraction, have played an important role in the history of economic thought.  They came to be used during the 1870s in relation to the so-called Robinson Crusoe economy, which was employed by Carl Menger in his Principles of Economics (1871).  The book was first published in German.  It is of interest to me that Menger wrote his book as a result of his was as a journalist in Vienna.  You can learn more the Robinson Crusoe economy at: https://en.wikipedia.org/wiki/Robinson_Crusoe_economy.  This abstraction continues to be useful in microeconomics, international trade, and thinking about isolated areas where transportation costs are high or infrastructure lacking, i.e., in some aspects of regional economics.  The founder of regional economics was Johann Heinrich von Thünen, about whom you can learn more at: http://www.biography.com/people/johann-heinrich-von-th%C3%BCnen-41022#early-life-and-education.  (This is one case where Wikipedia has little of value to say.)  His life work was Der isolierte Staat, which was published in three parts: 1826, 1850, and the post-humus 1863.  It was the 1826 volume that earned him an enduring place in regional economics, as he examined “an imaginary city in the middle of a plain surrounded by forests, with the territory divided into concentric rings.”  Unknown until a few minutes ago, for me, is the first publication of a translation of part III of The Isolated State, which you can find at: http://www.amazon.com/Isolated-Relation-Agriculture-Political-Economy/dp/023022251X/.  The book is devoted to forestry, examining such topics as timber yield and value.

(4 July 2015): “The Inevitable, Indispensable Property Tax” (http://www.nytimes.com/2015/07/05/business/the-inevitable-indispensable-property-tax.html)

——–[A column of The Upshot.]  “If you’re a homeowner, you probably don’t like paying property taxes.  But economists like property taxes for the same reason taxpayers hate them: They’re hard to avoid.  A 2008 study by researchers at the Organization for Economic Cooperation and Development looked at a number of countries and found that taxes on real property caused the least drag on gross domestic product per dollar of revenue raised.  Next came sales taxes, personal income taxes and corporate income taxes.  In other words, property taxes were the best way to collect revenue without hurting the economy too much.”

********The study mentioned above seems to be “Tax and Economic Growth” (http://www.oecd.org/tax/tax-policy/41000592.pdf).  The nature of tax systems is much in the news, so this article caught my attention.  I was somewhat set up for it as I read the (generally unfavorable) review of a new book on 19th century property tax advocate Henry George, by historian Edward T. O’Donnell entitled Henry George and the Crisis of Inequality.  You can read the review at: http://www.wsj.com/articles/the-tramp-and-the-locomotivethe-tramp-and-the-locomotive-1435775936.  You can learn more about the book at: http://www.amazon.com/Henry-George-Crisis-Inequality-Progress/dp/0231120001/.  Henry George’s Progress and Poverty (1879) had as much notoriety in its time as Thomas Piketty’s Capital in the Twenty-First Century (http://www.amazon.com/Capital-Twenty-First-Century-Thomas-Piketty/dp/067443000X/) has had in ours, although the books are quite different.  You can learn more about Henry George at: https://en.wikipedia.org/wiki/Henry_George.

(6 July 2015): “China’s Hunger for Robots Marks Significant Shift” [SR](http://www.wsj.com/articles/chinas-hunger-for-robots-marks-significant-shift-1436118228)

——–“Having devoured many of the world’s factory jobs, China is now handing them over to robots.  China already ranks as the world’s largest market for robotic machines.  Sales last year grew 54% from a year earlier, and the boom shows every sign of increasing.”  According to the International Federation of Robotics, “China is projected to have more installed industrial robots than any other country by next year.”  The Federation “estimates about 225,000 industrial robots were sold world-wide last year—a record and up 27% from the year before.  Robot sales grew in all major markets, with over half the growth in Asia.  But China is the rising start, with about 54,000 robots sold there in 2014.”  Currently China has relatively low “robot density,” having about “30 robots for every 10,000 factory workers.  In Germany, the density is 10 times that amount.”  The Chinese government seeks to increase robot density to 100 per 10,000 workers by 2020.  Soaring labor costs are contributing to the move to robots.  Nonetheless, “there is little evidence so far that robots are having a big impact on employment.”

********Robotization tends to be thought of in relation to manufacturing, but the closely connected digital revolution is affecting service industries, too.  Here are two examples that are affecting employment in the airlines and banking.   Airlines are increasingly allowing, sometimes requiring, passengers to “tag their own bags, [and] print luggage tags at home. . . . Later this year, some fliers in Europe likely will begin using what could be the future of lying luggage: permanent bag tags that digitally update if flight plans change.”  Changes such as these, including the introduction “self-service technologies like kiosks” contributed to a 13.5% decline in the number of U.S. ticket agents from 2004 to 2014, during which time “U.S. airline passengers increased 8.6%” [SR](http://www.wsj.com/articles/bag-tags-1435340070).  Banking is trying to figure out what to do with its branches.  “Firms across the country are tossing out their tellers, adding salespeople and remaking their drive-through lanes.  The moves are the latest cost-cutting experiments for the industry as customers move in droves to online and mobile banking.”  One company, Capital One Financial Corp. in Boston, is “expanding a ‘café’ format in which visitors can get gourmet coffee and free Wi-Fi but can’t sit with a banker who will open an account for them or drop off a loan application.  Instead, employees steer customers to its website and answer questions about the bank’s services.”  You can learn more about how banks are attempting to deal with their “excess” branches in the article “Is This a Coffee Shop or a Bank?” at: [SR](http://www.wsj.com/articles/is-this-a-coffee-shop-or-a-bank-1436225586).

(8 July 2015): “Shell Places Huge Bet on Arctic Oil Riches” [SR](http://www.wsj.com/articles/shell-places-huge-bet-on-arctic-oil-riches-1436311938)

——–“Royal Dutch Shell PLC is days away from drilling in the Arctic Ocean—betting it can find enough oil to justify the huge risks that keep almost every other competitor out of those icy waters.  The company is hauling two massive rigs—the Polar Pioneer and the Noble Discoverer—more than 2,000 miles up and around the Chukchi Sea, where it plans to begin work the third week of July.  Accompanying the rigs are 30 support vessels and seven aircraft . . . The voyage represents Shell’s effort to mount a comeback in the Arctic three years after a different rig ran aground following an unsuccessful drilling season.”  Although Shell had planned to drill two wells this year, a ruling by a federal agency will restrict it to just one.  Another setback for Shell was the recent discovery of “a small breach in the hull of a vessel carrying equipment for a spill response” that may require repairs.

********One thing that came through very clearly from the article was the very risky nature of the project.  The ill-fated 2012 venture is one illustration.  Another is given by a Shell employee Doug Sloan, who worked years on the North Slope oil project in Alaska.  As the senior drilling supervisor for this year’s well, he says that he tries to cultivate in his works a sense of “chronic unease,” noting “You don’t want to let your guard down.”  Both statements are eerily similar to those that were made in a striking article on the training of police officers: “Insider the School Teaching Cops When It’s OK to Kill” which appeared in Bloomberg Businessweek of July 1st.  You can read the article at: http://www.bloomberg.com/news/articles/2015-07-01/the-policeman-s-id.

May you have a good week!

Bruce

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