223 (29 July 2015)

Welcome to week 223!  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.

(29 June 2015): “Why Do People Support Charities?” (http://daily.jstor.org/people-support-charities/)

——–“In a recent story for The Atlantic, Derek Thompson explores the intriguing concept of effective altruism.  Essentially, the idea is that supporting good causes isn’t just a matter of the heart.  Instead, we ought to rationally evaluate how we can do the most good in the world.”  In doing so he works on a subject previously examined in a 1996 paper published in Voluntas International Journal of Voluntary and Nonprofit Organizations, by S. Wojciech Sokolowski.  There two theories are explored on why people give to charity: “One says that people are motivated by our personal attitudes and values.  The other says we do things because of social forces—our ties to, and interactions with, other people.”  The results of the study are somewhat difficult to interpret, but it does such that “being involved in a church or other organization predicted a desire to help others and a tendency to make charitable donations.  Without the organizational membership, there was no connection between attitude and action.”  Sokolowski’s article suggests that, “for most people, getting involved in the group that runs the soup kitchen may be a more likely route to philanthropy.”

********This article recently came to my attention in JSTOR Daily.  It connects to a recent article in The Atlantic, a link for which appears in the text, and the 1996 paper, a link for which appears in the text.  Both attitudes and social forces have relevance for behavior and they are things that economists discuss with some frequency, myself included.  In my teaching I made use of what I called the Behavior-Choice-Environment model to visually express attitudes (valuations) and the social forces (the environment).  You can see that representation under the Resources section at: https://theinvisibleforcesweekly.com/.

(22 July 2015): “The Bacteria Solution” (http://www.bloomberg.com/news/articles/2015-07-22/cosmetics-startup-aobiome-sells-bacteria-for-healthier-skin)

——–“Most startups have a fridge full of beer.  At AOBiome in Cambridge, Mass., there’s no room for booze.  The shelves are loads with bottles of the biotech company’s signature product, a live-bacteria solution to spritz on the face and body.  The spray is intended to help reduce a user’s dependence on soap, deodorant, and moisturizer.”  AOBiome’s general manager of consumer products Jasmina Aganovic notes that “It’s a challenging concept, . . . [as] We live in a world with Purell on every corner.”  Although AOBiome is “the first cosmetics company to market a product that purposely contains live bacteria . . . Other companies, including giants L’Oréal and Estée Lauder, are also investigating the role of bacteria in healthy skin.  Clinique advertises ‘probiotic technology,’ though its products contain preservatives that may kill living strains.”  At present the company is in the process of rebranding its products under the name Mother Dirt, to connect with the attraction of all things natural.  Few claims are now being made for making health-related claims, for fear of the FDA shutting the company down.  But there is substantial investor interest in the firm.

********If this article had come from The Wall Street Journal it might have been in the A-Hed.  Its main idea is quirky but it draws attention to how much there is still to be learned about the role of bacteria, not all of which are “bad,” in overall health.  Clearly this applies to bacteria on the skin as well as the more-frequently mentioned microbiome.  Wikipedia has a nice entry on ‘Microbiota’ at: https://en.wikipedia.org/wiki/Microbiota.  You can learn more about AO Biome and Mother Dirt at: https://www.aobiome.com/.

(23 July 2015): “Distressed Denim: Levi’s Tries to Adapt to the Yoga Pants Era” (http://www.bloomberg.com/graphics/2015-levi-strauss-confronts-the-yoga-pant/)

——–“Two decades ago, Levi’s was bigger than Nike, with revenue exceeding $7 billion.  Sales have since sagged to $4.8 billion.  The company is privately owned by its founder’s heirs, and the luxury of not having to answer to public shareholders has helped make Levi’s slow to respond to change.  For a long time, that didn’t matter—Levi’s had built a machine that churned out familiar jeans for large department stores and customers with predictable tastes. . . . As those businesses declined . . . so did their sales of Levi’s jeans.”  Along with that was a reduction in the sales of Levi’s to women.  “While many clothing makers get the bulk of their business from women, Levi’s gets just 23 percent, according to an SEC filing.”  The increasing popularity of yoga pants, which Levi’s missed, is one of the reasons for this imbalance, which is part of the fashion evolution called “athleisure.”  Levi’s, led by Bart Sights, senior director for technical innovation, is working to rework its jeans so as to become more attractive to women in this new environment.

(23 July 2015): “Falling Crude Prices Upend Canada’s Oil Sands Projects” [SR](http://www.wsj.com/articles/falling-crude-prices-upend-canadas-oil-sands-projects-1437609134)

——–“Of the roughly two million barrels a day that Canada currently produces from its oil sands, about half is mined from the surface using giant excavators and the world’s tallest dump trucks.  The rest is too deep to mine and must be recovered by newer technology such an injecting steam underground to leach out oil deposits.  That accounts for about 80% of Canada’s reserves—the world’s third-largest source of untapped crude.”  The method to extract the underground deposits is called steam assisted gravity drainage (SAGD) and it has “no relation to hydraulic fracturing.”  This method “is turning out to be more technologically complex and unpredictable than billed when first deployed commercially in the early 2000s.”  As a result, the method is an unusually costly method of extracting oil and companies using it on the oil sands, which is most of them, have been especially hard hit as the world price of oil has fallen to the $50 a barrel range.

********Wikipedia has a clear description of SAGD, which employs “a pair of horizontal wells . . . one a few metres above the other.  High pressure steam is continuously injected into the upper wellbore to heat the oil and reduce its viscosity, causing the heated oil to drain into the lower wellbore, where it is pumped out.”  You can learn more at: https://en.wikipedia.org/wiki/Steam-assisted_gravity_drainage.

********The low price of oil has meant layoffs in the oil industry, as outlined in “More Layoffs Expected at U.S. Energy Firms” [SR](http://www.wsj.com/itp/20150727/us/businessandtech).  For example, “ConocoPhillips, one of the world’s largest oi-and-gas exploration companies, has already cut nearly 1,500 jobs so far this year . . . But the Houston-based company is planning more layoffs for this fall that could number into the thousands, according to people familiar with the matter.”  Especially interesting, but not especially surprising, is the order of layoffs.  Initial rounds tend to be “blue-collar jobs” followed by “engineers and scientists.”  In fact, “Many oil-exploration companies hesitate to lay off geoscientists and other highly skilled workers.”  According to consultant Dennis Cassidy of Alix Partners, “The last thing a company wants to do is dismantle the dream team they took a decade to put together.”  This approach stems from the oil-crash of the mid-1980s, “when so many educated workers were let go that it created a talent gap the industry struggled to fill for 20 years.”

(24 July 2015): “Next Step for Drones: Defending Against Them” [SR](http://www.wsj.com/articles/next-step-for-drones-defending-against-them-1437645600)

——–“As Amazon Inc. and Google Inc. consider drones for tasks ranging from package delivery to providing high-speed Internet, regulators and military planners worry that low-cost drones, which are widely available for purchase, could pose a threat to commercial aviation, vital infrastructure and even troops.”  The devices “tend to be smaller and light than their military counterparts.  That also makes them harder to detect.  Though they have many legitimate applications, in fields such as photography and film-making, their rapid spread and potential for misuse has given rise to a new business: developing anti-drone defenses.”  Drone defense measures vary from taking them over, an approach being taken by French defense-electronics maker Thales SA, to taking them down, an approach recently demonstrated by the consortium of European defense companies called MBDA.  In the latter approach, a minidrone was shot down with a laser at 500 metres, an approach which wouldn’t be practical in everywhere.

********Intriguing how one technological development leads to another, especially where items concerning defense are concerned.  The invisible foot, i.e., legal and political forces, will play a large role in what drones can legally do and how drones can be legally be counteracted.  All this calls to mind a book review in The Economist on “The evolution of growth” (http://www.economist.com/news/books-and-arts/21659692-physicist-explains-how-order-born-multiplier-effects).  The book in question is Why Information Grows: The Evolution of Order, from Atoms to Economies, by César Hidalgo.  Hidalgo notes, “Economies grow . . . because the information contained in them grows—not just in people’s heads, but also in the social networks that connect everyone and even in the objects that populate the world.  What is more, this every-expanding pool of information did not start with humans, but dates back to the beginning of time.”  You can learn more about the book at: http://www.amazon.com/Why-Information-Grows-Evolution-Economies/dp/0465048994/.

********Information can grow, of course, but it can also be destroyed.  An interesting perspective on this is presented in the one-page Schumpeter column “The enemy within” (http://www.economist.com/news/business/21659776-rogue-employees-can-wreak-more-damage-company-competitors-enemy-within).  The bottom line: “The best way to fight the enemy within is to treat your employees with respect.”  Aretha Franklin made that point long ago: https://www.youtube.com/watch?v=6FOUqQt3Kg0.

********Another aspect of information relates to biases.  Academics have long known that it is easier to publish statistically significant results than those are not.  This applies with regard to clinical trials of drugs, too.  That is why there is a push to publish all trials of a drug or procedure, whether they are shown to be effective, without effect, or detrimental.  Perspective on this is provided in “Clinical trials: Spilling the beans” (http://www.economist.com/news/science-and-technology/21659703-failure-publish-results-all-clinical-trials-skewing-medical).

(27 July 2015): “Palm-Oil Migrant Workers Tell of Abuses on Malaysian Plantations” [SRS](http://www.wsj.com/articles/palm-oil-migrant-workers-tell-of-abuses-on-malaysian-plantations-1437933321)

——–Malaysia “exports nearly $12 billion of palm oil a year, around 40% of the world’s supply, and has a growing need for unskilled workers.”  Part of that need is being fulfilled by illegal workers, such as 22-year-old Mohammad Rubel, of Bangladesh, who was brought of Malaysia “under the auspices of human smugglers.”  To get there he “endured three weeks in a crowded boat with inadequate food and water, followed by more weeks confined in a jungle camp while guards extorted a ransom from his parents back home.”  During transit “he saw dozens of fellow illegal migrants die from exhaustion, disease or beatings.”  In recent years Malaysia has been a Tier 3 (lowest ranking) country on the U.S. State Department’s annual report on Trafficking in Persons report.  As such, it would not qualify for the Trans-Pacific Partnership trade agreement currently under negotiation.  “As a result, there now is pressure to upgrade Malaysia to Tier 2.

********Despite the existence of the Roundtable on Sustainable Palm Oil (RSPO), which is supposed to “ensure environmental and social standards” in palm oil production, it is evident that labor abuses are significant and continuing.  I was surprised to learn that palm oil is “the mot-consumed vegetable oil in the world.”  One of the contributing factors to the emergence of its position was “a 2006 order by the U.S. Food and Drug Administration to label trans fats in foods, prompting snack companies to look for alternatives.”  You can read about these and other facts at: http://blogs.wsj.com/briefly/2015/07/26/5-things-to-know-about-palm-oil/.  You can see a three-minute video on palm oil at: http://www.wsj.com/video/alleged-worker-abuse-at-malaysian-palm-oil-plantations/EAEB9DB2-E4BC-4F29-BE7E-514ADFF76A48.html.

(29 July 2015): “China Pushes to Rewrite Rules of Global Internet” [SR](http://www.wsj.com/articles/china-pushes-to-rewrite-rules-of-global-internet-1438112980)

——–“As social media helped topple regimes in the Middle East and northern Africa, a senior colonel in the People’s Liberation Army publicly warned that an Internet dominated by the U.S. threatened to overthrow China’s Communist Party.  Ye Zheng and a Chinese researcher, writing in the state-run China Youth Daily, said the Internet represented a new form of global control, and the U.S. was a ‘shadow’ present during some of those popular uprisings.  Beijing had better pay attention.  Four years after they sounded that alarm, China is paying a lot of attention.  Its government is pushing to rewrite the rules of the global Internet, aiming to draw the world’s largest group of Internet users away from an interconnected global commons and to increasingly run parts of the Internet on China’s terms.  It envisions a future in which governments patrol online discourse like border-control agents, rather than let the U.S., long the world’s digital leader, dictate the rules.”  Drawn by “an online population nearing 700 million” many Western companies “are surrendering to Beijing’s rules so they can build a position in China.”

********The expression which popped up a number of times in the article is “an Internet with borders.”  This would seem to be comparable to the enclosing of the commons in England and the fencing of the western plains of the U.S. by barbed wire.  According to China Internet controls “are necessary on national-security grounds, especially following allegations by former U.S. defense contractor Edward Snowden about American cybersleuthing.”  In this way, it would seem, arguments for enclosing the Internet differ from those made for England and the United States.

May you have a good week!

Bruce

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