228 (2 September 2015)

Welcome to week 228!  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.

(7 August 2015): “Exploiting gullible people is a modern form of mining” (http://www.theguardian.com/lifeandstyle/2015/aug/07/exploiting-gullible-people-modern-mining)

——–[This article appeared in print in The Guardian Weekly on 21 August 2015.]  In the forthcoming book Phishing for Phools: The Economics of Manipulation and Deception, by George Akerlof and Robert Shiller, the argument is made that “deception and manipulation aren’t confined to the fringes of the economy,” where psychics are found.  Instead, “they’re central to how consumer capitalism works.  We’re being phished all the time . . . In a free market, one set of profit opportunities comes from exploiting people’s psychological weaknesses.  Trickery is so commonplace, the authors show, that the line we draw between sleazy or illegal behaviour and canny business practice is pretty arbitrary.”

********You can learn more about the book and vied a six-minute video with Robert Shiller at: http://www.amazon.com/Phishing-Phools-Economics-Manipulation-Deception/dp/0691168318/.  Looking at the Table of Contents, it appears that the authors give many examples of phishing.  Shiller is a well-known for his work on behavioral finance, as Akerlof is well-known for his work on “the lemons problem” and for being married to Janet Yellen, who is the Chair of the Board of Governors of the Federal Reserve System.  I’m curious about the theoretical framework of Phishing.

(27 August 2015): “The Sharing Economy Comes to the Farm” (http://www.bloomberg.com/news/articles/2015-08-27/the-sharing-economy-comes-to-the-farm)

——-“Three months out of the year, the 5,500 members of the Heartland Co-op push their sprayers and fertilizing machines to maximum capacity . . . The rest of the time, the machinery typically sits in barns, idle until the next season, like most of the $248 billion of equipment owned by farmers across the country.  FarmLink, based in Kansas City, Mo., seeks to turn that equation around.  Run by Ron LeMay, who headed Spring’s wireless division until 2003, the company has created a platform to help farmers rent out their unused equipment to growers who may be hundreds of miles away to take advantage of the differences in peak harvest seasons.”  According FarmLink president Jeff Dema, “It’s Airbnb for agriculture . . . Farmers are examining their bottom lines and wondering if the $500,000 in their shed might be put to better use.”

********It has long been known that capital goods are utilized far less than the amount of services they could conceivably yield.  But the cost of moving these resources through time or space to where they might be used, combined with the cost of acquiring the necessary information about the opportunities available and concluding the required agreements, limited their use.  Now, with lower information and agreement costs due to the digitization of knowledge (Big Data), more of these services are being used.  That will happen increasingly, as we have seen, and undoubtedly will give rise to many legal and political actions aimed at reducing their use.  For a variety of reasons, some people will wish for these services to go unused.

********Somewhat related is the article “On the Farm: Startups Put Data in Farmers’ Hands” (http://www.wsj.com/articles/on-the-farm-startups-put-data-in-farmers-hands-1441044071).  Data generated by sensors monitoring routine farming activities are now being “harvested” and placed in “silos” in which form the data can be “monetized,” thereby providing another “income flow” for farmers.  In concept, this might improve the utilization of farm equipment.  Now that it is easier to monitor a wide variety of activities, they almost certainly will be, and new goods and services will be developed as a consequence.  Devices in the Fitbit family (https://www.fitbit.com/) are there to monitor things like one’s heart rate and I recently received a solicitation from my auto insurance agent holding out the possibility of lower rates if I install a monitor of my driving behavior in the family cars.

(28 August 2015): “India Embraces Luxury as China Turns Cool” [SR](http://www.wsj.com/articles/india-embraces-luxury-as-china-turns-cool-1440720657)

——–“As sales growth slows in China and other big markets, luxury-gods makers are increasingly looking to cash in on patches of new wealth sprouting in often-unexpected parts of India, where there is a growing appetite for luxury brands. . . . The hunt for these customers is sending big name brands into India’s heartland, as they seek to sell handbags, high heels and other glamorous goods in India’s second- and third-tier cities, which may have populations in the millions.”  Designers of luxury items, like clutch bags selling for $2,000 each, “follow the trunk-show model because the wealthy [in these locales] prefer to shop discreetly and it is less intimidating for some first-time wealthy shoppers if the brands arrive at their doorstep, without the need for any travel to big-city boutiques.”  Although “Shoes, watches and bags are a hit with wealthy Indian consumers . . . other kinds of luxury goods are a harder sell.  Many Indians prefer traditional dress to Western clothing.  Indian jewelry, too, follows local traditions instead of international tastes.”

********Interesting, but not surprising, that first-time consumers of luxury items must learn to buy them, but this seems consistent with stereotypes about the nouveau riche.  I suppose that while one is “learning the ropes,” it is well to do it privately where expected mistakes are of less consequence.  Interesting, too, is the notion that some goods are prone to international tastes and some are not.  Again, this is not surprising but worth keeping in mind, especially for those who are marketing such goods.  You can find “5 Charts That Explain India’s Luxury Market” at: http://blogs.wsj.com/briefly/2015/08/28/5-charts-that-explain-indias-luxury-market/.

(29 August 2015): “Nuclear waste: Faff and fallout” (http://www.economist.com/news/united-states/21662536-next-president-will-have-decide-what-do-about-radioactive-waste-faff-and-fallout)

——–“Since the start of Barack Obama’s term in office in 2009, America has had no long-term plan for its nuclear waste. . . . As a result, some 70,000 tons is waiting at power plants . . . in silos and pools.”  In 2017, it will be necessary to “face a difficult question: how to reopen the debate about what to do with spent fuel.”  The nuclear competition between the U.S. and the Soviet Union generated much waste at the former weapons-production site in Hanford, Washington, which is “deeply contaminated.”  The cleanup at the site “involves some 11,000 workers, costs around $3 billion a year and will not finish before 2046.  The problem now, however, is civilian waste from power plants that came online in the 1960s, 1960s and 1980s.”

********The scale of operations at Hanford, Washington is mind boggling.  As my wife, appropriately, pointed out, these costs are not typically considered when people discuss the benefits of nuclear energy.  The article suggests that, with a new president and the retirement of Nevada senator Harry Reid, the Yucca Mountain option as a nuclear waste repository will be reconsidered.  You can learn more about the waste repository at: https://en.wikipedia.org/wiki/Yucca_Mountain_nuclear_waste_repository.

(29 August 2015): “Lexington: The wheels on the bus” (http://www.economist.com/news/united-states/21662534-american-icon-runs-political-trouble-wheels-bus)

********The article points to the increasingly difficulty of paying for school buses at a time when they are paid for by property taxes and state legislators, e.g., those in Indiana, have  placed caps on property taxes.  The immediate result has been more parents ferrying their children to school because there are no school buses running or because now parents only, rather than the community as a whole, are paying for them.

(29 August 2015): “The economics of generosity: The kindness of neighbours” (http://www.economist.com/news/finance-and-economics/21662596-new-paper-asks-why-some-tanzanian-farmers-are-more-selfish-others)

——–In hypothetical times of water scarcity, men and women of high and low status to were studied.  In such times, “only high-status women shared the water fairly.  Low-status men and women would share fairly when water was plentiful, but were stingier when water was scarce.  High-status men hogged water at all times.”

********The brief summary is based upon an article in the July 2015 copy of Feminist Economics.  You read it in its entirety at: http://www.tandfonline.com/eprint/Hwukmgnff893W6WKtEAj/full#.VeeH4fZVhBc.

(1 September 2015): “Inside Kellogg’s Effort to Cash In on the Health-Food Craze” [SR](http://www.wsj.com/articles/inside-kelloggs-effort-to-cash-in-on-the-health-food-craze-1441073082)

——–“Years before natural and organic foods exploded in popularity, cereal behemoth Kellogg Co. acquired one of the segment’s pioneers: Kashi Co.”  Kashi merged with Kellogg in 2000 and by 2008, Kashi sales had soared by 24 times, giving the maker of Frosted Flakes and Rick Krispies a lead in adapting to new consumer tastes.”  But Kashi’s sales foundered—new “product rollouts slowed just as competition in the healthy-snack and cereal aisles swelled.”  Subsequently, Kashi’s San Diego office was closed, losing its casual work culture, and incorporated into corporate headquarters at Battle Creek, Michigan.  The move failed.  “Kellogg had alienated many of the brands fervent fans with its defensive stance on using genetically modified ingredients, or GMOS.  In 2014, Kashi posted about $500 million in sales, 17% below their peak.  Today, executives at Kellogg are contrite—and focused on turning around Kashi.”

********The article points to the managerial challenges of merging companies with differing cultures, as well as the likely tradeoff between centralization and innovation.  Regarding this, Kellogg CEO John Bryant notes about its relationship with Kashi, “it’s not in any way a negative relationship . . . It’s just, ‘How can we help?’ . . . But . . . ‘a large organization can sometimes help too much.’”

(2 September 2015): “Canada Illustrates Plight of Rich but Resource-Dependent Countries” [SR](http://www.wsj.com/articles/canada-illustrates-plight-of-rich-but-resource-dependent-countries-1441120664)

——–“For a small group of the world’s most resource-dependent rich countries, the stalling economy of Canada is a stark reminder of how China’s slowing growth stands to shape the coming years.”  According to Tony Makin of the Lee Kuan Yew School of Public Policy in Singapore, “Among developed countries, Canada, Australian Norway are distinctive ‘because they have become more dependent on commodities for their exports, particularly since the turn of the century.’”  Canada’s dependence has been such that its economy “contracted for a second consecutive quarter between April and June” due to low prices for base metals and crude oil.

********I was surprised to learn that “Australia hasn’t had a recession in 24 years, and is still expected to post positive growth for the second quarter” of the year.  The dramatic economic expansion of China during this time period coupled with Australia’s proximity to it certainly contributed to that performance.  Is that all there is to the economic story of Australia?

May you have a good week!

Bruce

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