224 (5 August 2015)

Welcome to week 224!  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 an Internet title search.

Please see Resources to find a pdf of this issue, a cumulative pdf for issues 1-208, and a cumulative pdf for issues 209-present.

(24 July 2015): “India’s skin-whitening creams highlight a complex over darker complexions” (http://www.theguardian.com/world/2015/jul/24/dark-skin-india-prejudice-whitening)

********This article appeared in the print edition of The Guardian Weekly of 31 July 2015.  It doesn’t lend itself well to the usual summary but it does suggest the valorization of skin color in India.  It shows up in the film industry, in marriage ads, and in the market for skin-lightening creams, as well as in other places.  According to Urvashi Butalia, co-founder of Kali for Women, “There are two factors driving this absurd mania . . . Firstly there’s the invasions, with the idea that the Aryans are superior to the Dravidians; secondly the caste system, the upper castes supposedly being fairer skinned than their lowlier fellows.  India’s rulers have often been white, from the Aryans to British colonialists.  A pale skin is associated with the exercise of power.”  You can learn more about Kali for Women at: https://en.wikipedia.org/wiki/Kali_for_Women.

(30 July 2015): “A $15 Minimum Wage.  But Why Just for Fast-Food Workers?” (http://www.nytimes.com/2015/07/29/upshot/a-15-minimum-wage-but-why-just-for-fast-food-workers.html)

——–“A proposed increase in the minimum wage in New York State will be substantial, but that’s really not what bothers some economists.  It’s that the raise would apply only to fast-food workers, and only if they work for a chain with at least 30 locations.  A wage increase applying to such a narrow segment of the economy is bound to have unintended consequences.”  So-called “distortions” resulting from “sector- and firm-specific minimum wages” have led labor economist Lawrence Katz of Harvard University to favor minimum wages “that apply to all workers, both at the national level and especially in jurisdictions like New York.”

********Unintended consequences always exist except in “blackboard models,” i.e., worlds created by an analyst.  That being said, one must recognize that unintended consequences may be adverse and beneficial, and not just adverse as is routinely assumed.

(30 July 2015): “Renewable Energy Powers Up Rural India” [SR](http://www.wsj.com/articles/renewable-energy-powers-up-rural-india-1438193488)

——–“Hoping to ride India’s cellphone revolution, some small Indian startups are trying to bring more reliable power to the country’s rural regions using mini electricity plants, powered by renewable alternative-energy sources such as solar, wind and biogas. . . . Omnigrid Micropower Co. has developed a business model where it sets up its small solar-power plants near cellular towers to guarantee reliable income from telecommunications companies before it starts serving villagers.”  Companies like Omnigrid hope to repeat the success of cellular phone service.  “Despite decades of government spending on phone lines, it wasn’t until private-sector cellular companies came along that hundreds of millions of Indians got their first phones.”  This became possible by eliminating the need to build a costly network of wires.  “Renewable energy could offer a similar solution for remote areas, because it is created and consumed in the same region and doesn’t require massive power plants and hundreds of kilometers of power lines.”

********The connection between cell phones and renewable energy struck me as interesting, as did the similarity between phone systems and energy distribution.  The situation in India, though, is different than in the U.S. as there are, typically, phone and energy distribution systems already in place, so there is the issue of how to deal with incumbents.  This, of course, will be one of the big issues as the implications of President Obama’s recent energy initiatives (http://www.bbc.com/news/world-us-canada-33753067) are further explored and debated.

(31 July 2015): “Thirsty for Growth, Liquor Giant Taps African Market” [SR](http://www.wsj.com/articles/thirsty-for-growth-liquor-giant-taps-african-market-1438309801)

——-[Nairobi, Kenya.]  “For 20 years, Leonard Odhiambo has run a thriving business off a dirt path in Kibera, the biggest slum in sub-Saharan Africa.  He brews changa’a, a potent spirit made from molasses and mashed grain.  A half-liter bottle sells for just over a dollar.”  The spirit is illegal but his biggest concern these days is not the police but Diageo PLC, “the world’s largest spirits company,” which is “selling inexpensive liquor barely a hundred yards from his door.  The cheapest, a whiskey called Jebel Gold, costs about 10 cents for a 30-milliter ‘tot’—about two-thirds of a shot.”  Diageo is not alone: “International spirits companies are expanding across Africa, targeting even the poorest consumers with liquor made locally and sold at dirt-cheap prices. . . . The global spirits industry sees Africa as the final frontier—a potentially huge market that is largely untapped.”  These companies have realized that “to compete effectively in Africa, they need to move down-market,” a new experience for some.  According to Diageo, most of the sales of these brands “have been to drinkers moving out of the illicit market.”

********Interesting to see that a legal and presumably more standardized product is competing away customers from illegal and presumably less standardized product.  One of the reasons for this is safety, as the article “Illegal local brew kills 19 in Kenya” attests (http://www.wsj.com/articles/thirsty-for-growth-liquor-giant-taps-african-market-1438309801).

(1 August 2015): “Fortune Global 500: 2015: (http://fortune.com/global500/)

********The 2015 Fortune Global 500 was just released and Walmart is at the top of the revenue list at $486 billion, followed by Sinopec Group, Royal Dutch Shell, China National Petroleum, and Exxon Mobil.  As with the Fortune 500 list referenced on 15 June 2015, it is possible to filter the list by various criteria: industry, city, state, and sector.  The three companies with headquarters in North Carolina that made the list are: Bank of America (80), Lowe’s (176), and Duke Energy (462).  Connected with the 500 is a valuable graphic (showing the location of Global 500 revenues by region, country, and city.  You can find it, with additional information, at: http://fortune.com/2015/07/23/global-500-east-growth/.

(1 August 2015): “The Great Lakes: From rustbelt to bluebelt” (http://www.economist.com/news/united-states/21660160-could-water-be-midwests-ticket-economic-rebirth-rustbelt-bluebelt)

——–“Lake Michigan and the four other lakes in the region are also the most important asset for Chicago’s home state, Illinois, and the seven other American states that border the Great Lakes, according to a vocal school of thought in the Midwest. . . . The Midwest has more than 20% of the world’s (and 80% of America’s) freshwater supply.”  Building upon that it is now “trying to position itself as a centre for research and development for water-related technologies. . . . In addition to becoming a home for technological innovations, the Midwest hopes to attract water-guzzling industries such as food processing and chemicals to the Great Lakes’ shores.”  Still, “the precious liquid cannot travel far.  In 2008 the Great Lakes Compact between the eight states bordering the lakes and Canada’s Ontario and Quebec banned the diversion of water beyond the Great Lakes watershed, with few exceptions.”  Climate change could “transform the Midwest from economic drifting to something like its former prosperity.”

********You can learn more about the Great Lakes Compact at: https://en.wikipedia.org/wiki/Great_Lakes_Compact.

(1 August 2015): “Free exchange: Graduating from destitution” (http://www.economist.com/node/21660133)

——–In a new paper, Abhijit Banerjee, Esther Duflo, et al. claim “to have identified an anti-poverty strategy that works consistently, based on a seven-year, six-country study of more than 10,000 poor households.  The secret, the economists argue, is to hand out assets, followed by several months of cash transfers, followed by as much as two years of training and encouragement.  That formula seems to have made a lasting difference to the lives of the very poorest in countries as different as Ghana, Pakistan and Peru.”  Their approach was originally developed by BRAC, a large Bangladeshi NGO.”  In contrast to asset-based programs of Heifer International, Oxfam, and World Vision, that “give cows, goats or chickens to poor people in developing countries,” thereby running the risk that the assets will be eaten by those very poor, BRAC’s idea is it give those in its “graduation programme” not just chickens “but also training on how to keep them, temporary income support to help them to resist the inevitable temptation to eat them, and repeated visits from programme workers to reinforce the training and bolster participants’ confidence.”

********Included in the article is a link to a structured abstract of the article, “A multifaceted program causes lasting progress for the very poor: Evidence from six countries,” which appeared in Science on 15 May 20.  You can read it at: http://www.sciencemag.org/content/348/6236/1260799.abstract,

(3 August 2015): “Dole and Other Companies Sour on Delaware as Corporate Haven” [SR](http://www.wsj.com/articles/dole-and-other-companies-sour-on-delaware-as-corporate-haven-1438569507)

——–Dole Food Co., like many others, was attracted to the business-friendly reputation of Delaware, one that dates to 1899 when the state “enacted one of the country’s most lenient incorporation laws.”  Today it dominates the “market for corporate charters.” According to FactSet, “Of U.S. firms that have gone public in the past two years, about 85% incorporated in Delaware” and “54% of public companies” have the state as its legal home.  As a result, in Delaware “registered businesses outnumber people.”  Governor Jack Markell notes that “Delaware has long been a preferred place of incorporation because we have a legal community and court system with unparalleled experience in corporate law matters.”  Corporate fees received by the state are projected to exceed $1 billion this fiscal year, comprising “26% of Delaware’s budget.”  Changes in Delaware law that seem to encourage shareholder suits against management are leading some corporations to rethink their legal location.   At the same time, states like Michigan and Texas “are angling for Delaware’s business.”  But state officials have “fiercely protected what’s known locally as ‘the franchise.’”

********In 2014 Delaware’s human population was 935,614 (http://quickfacts.census.gov/qfd/states/10000.html).  You can learn more about Delaware’s Division of Corporations at: http://corp.delaware.gov/aboutagency.shtml.  There it is noted that “More than 1,000,000 business entities have made Delaware their legal home.”  It will come as news to no one that the competition among states for jobs is intense and continuous, but the means by which states compete with one another are varied.  Delaware has chosen to compete, at least in part, via the invisible foot.

(4 August 2015): “Anonymously Saving the World” [SR](http://www.wsj.com/articles/anonymously-saving-the-world-1438642557)

——–[Review, by Jon Gertner, of Applied Minds: How Engineers Think, by Guru Madhavan.]  “The heroes of Guru Madhavan’s compact book about the logical habits of engineers are not the usual suspects of the iPhone era.  With barely a mention of Wozniak or Jobs, the author takes us back to an earlier time so that we can witness the solving of problems that have long since gone away.”  The people paid tribute to in the book are those, like chemical engineer Margaret Hutchinson, “who in the 1940s developed a fermentation method to mass-produce” penicillin.  In doing so, Madhavan points to three habits of mind.  “Good engineers create structure so they can understand . . . , the acknowledge constraints . . . that they must work within or somehow superseded.  Finally, they deftly evaluate trade-offs so that they can formulate the most effective application for a given situation.”  In brief, “Engineers translate the realm of ideas into practical reality; they not only make the world work, they make the world not break.”

********A book that resonates with the microeconomist in me.  In points out the importance of application, its challenges, and its frequent lack of glory.  You can learn more about the book at: http://www.amazon.com/Applied-Minds-How-Engineers-Think/dp/039323987X/.  The reviewer of Applied Minds is the author of The Idea Factory: Bell Labs and the Great Age of American Innovation.

May you have a good week!

Bruce

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