Welcome to week 229! 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.
(3 September 2015): “Why Americans Are Going Abroad for an M.B.A.” [SR](http://www.wsj.com/articles/why-americans-are-going-abroad-for-an-m-b-a-1441217532)
——–In one word: Cost. “For some students, European programs, which are often conducted in English, seem to be a better deal than U.S. programs, allowing them to get their M.B.A. in about a year, compared with U.S. full-time programs, which are typically two years. That means lower tuition, and it reduces the cost of leaving the workforce, students, admissions officers and consultants say.” In addition, “The U.S. dollar’s strength against the euro in recent months has underscored this return on investment.” Beyond cost, there is the matter of international experience. Delia Garced, who is the global director of experienced commercial hires for General Electric, stresses the importance of employees “who understand how to do business in a growth country and work with a variety of different cultures.”
********In the discussion about “the cost of leaving the workforce” it is easy to see an allusion to the economist’s notion of opportunity cost, i.e., the value of the highest-valued displaced alternative.” One gives up a good deal of current earnings and incurs some career disruption in pursuing a two-year degree rather than a one-year degree. Is the quality the same? Very hard to say. I wonder how widely the notion of “career interruption” and its consequences has been studied? Childbirth and child rearing often lead to career interruption, but so can education, illness, and simply the need for a break. No doubt academic sabbaticals enter into this, too. I found one article that seems to provide an introduction to the literature: “Career Interrupted For What Reason? Job Interruptions And Their Wage Effects” (http://www.cluteinstitute.com/ojs/index.php/JABR/article/view/8664/8658). Its author, Jill K. Hayter, teaches at East Tennessee State University.
(3 September 2015): “Sharing Economy Goes Hyperlocal With a Growing Market for Household Items” (http://www.nytimes.com/2015/09/03/business/smallbusiness/sharing-economy-goes-hyperlocal-with-a-growing-market-for-household-items.html)
——–A growing number of people “are using mobile apps to find, borrow or rent items as diverse as power drills and drones from people living nearby. It is an extension of the successful Airbnb, Uber and Lyft model, but for household items.” Multiple websites have sought to tap the trend, “with Peerby.com a front-runner. Since its beginning in Amsterdam in 2012, Peerby has expanded to 20 cities in Europe . . . It expects to have a network of owners and renters in all major American cities by 2017.” Peerby occupies a niche “littered with the carcasses of early start-ups that went belly-up.” The question is, “Can Peerby truly succeed where others have failed?” According to Ann Miura-Ko, a founder of a firm that has invested in similar start-ups, “Millennials are particularly big on sharing rather than owning.” Giving a name to such a shift, Simon Rothman, a partner of a firm that has been an early investor in companies like Airbnb and Facebook, notes: “We’re shifting from an ownership society to an access society.”
********Alternatively to Rothman, we’re shifting from an ownership society to a rental society. I.e., we can either buy the good or buy the services that the ownership of the good would provide. Decisions as to rent or buy are frequently encountered and much has been written about them, as an Internet search will reveal. I ran across “The consumer’s rent vs. buy decision in the rentailer” (http://www.sciencedirect.com/science/article/pii/S0167811609000251), which caught my attention due to the neologism rentailer. A rentailer is “a retail outlet that rents and sells new and used home video titles.”
(3 September 2015): “The Unlikely Cities That Will Power the U.S. Economy” (http://www.bloomberg.com/graphics/2015-stem-jobs/)
********This article, although rich in content, is especially noteworthy for its graphics, which tends to focus on STEM (Science, Technology, Engineering, and Mathematics) jobs and their geographic location. Especially interesting is the graph that connects STEM pay rank on the left-hand-side of the graph and Cost-of-living rank on the right-hand-side. San Francisco, California, for example, has the second highest pay rank and the highest cost rank. But other cities show wide divergences between the two. The article notes Huntsville, Alabama at 9th in pay and 68th in cost, whereas Madison, Wisconsin is 89th in pay and 30th in cost. For North Carolina, Charlotte ranks 33rd in pay and 64th in cost. Thought provoking, to be sure.
********Differences between rankings on earning and the cost-of-living connects nicely with an article in The Economist on “Tackling poverty: It’s expensive to be poor” (http://www.economist.com/news/united-states/21663262-why-low-income-americans-often-have-pay-more-its-expensive-be-poor). For many reasons, the poor pay more for roughly the same goods and services that are purchased by those who are more affluent. “The high cost of being poor has two main implications. First, inequality is worse than income figures alone suggest. . . . Second, finding ways to reduce these costs, for instance by making it easier to claim the EITC [Earned-Income Tax Credit] without borrowing, or by changing the rules on overdraft fees . . . , would be a cheap way of helping low earners.” Such concerns bear addressing in light of recent experience in the U.S., as covered in “Low-Income Workers See Biggest Drop in Paychecks” (http://www.nytimes.com/2015/09/03/business/low-income-workers-see-biggest-drop-in-paychecks.html). According to the article, the decline in real wages between 2009-14 for the lowest-paid fifth of workers was 5.7%. Of the occupations noted, the largest decline was for restaurant cooks—8.9%.
(4 September 2015): “Beware of Octopus Pots” (http://www.wsj.com/articles/beware-of-octopus-pots-1441320771)
——–[A review of The Silo Effect: The Peril of Expertise and the Promise of Breaking Down Barriers, by Gillian Tett).] “Gillian Tett received a doctorate in cultural anthropology before becoming a journalist at the Financial Times. She found that the discipline of living with and studying villagers of Tajikistan proved a useful preparation for analyzing the tribes of business and finance. In ‘The Silo Effect’ she applies her anthropologist’s lens to the problem of why so many organizations still suffer from a failure to communicate.” According to Tett, silos “occur when we classify the world around us and then resist attempts to change those classifications.” She offers three examples of “silos wreaking havoc: at Sony, and then at UBS and the Bank of England during the financial crisis.”
********The review concludes, “Silos emerge out of a desire for efficiency, to classify our world and make it easier to manage. Escaping them requires the opposite of efficiency, a kind of slack, so that we can shift our perspective. In the hustling worlds that Ms. Tett describes, that slack, that patience with uncertainty, may be the rarest commodity of all.” You can learn more about The Silo Effect at: http://www.amazon.com/Silo-Effect-Expertise-Breaking-Barriers/dp/1451644736/. You can hear an 8-minute interview with Gillian Tett at: http://radio.wosu.org/post/building-and-breaking-down-silos#stream/0.
*******All of this, of course, points to the importance of cognitive diversity, just one of the many diversities that, if attended to, can contribute so much to organizational and societal performance. Along these lines it is worth drawing attention to another book review, one that appeared in the Journal of Economic Literature, on Why Government Fails So Often: And How It Can Do Better, by Peter Schuck. The authors of the review, David M. Levy and Sandra J. Peart, draw attention to the concept of internalities, a sort of companion of the concept of externalities so familiar to economists, their students, and to critics of markets. Internalities seem to have been first defined by Charles Wolf, Jr., in the 1979 article “A Theory of Nonmarket Failure: Framework for Implementation Analysis” that appeared in the Journal of Law and Economics. The basic idea seems to pertain to the nonalignment of individual and organizational (governmental) goals. In relation to this attention is drawn to goals that are exogenous, i.e., organizations goals imposed upon individuals, as opposed to those that are endogenous, i.e., organizational goals that emerge from individual. Levy and Peart conclude their review, noting: “Peter Schuck’s important book reminds us about the allure of expert judgments and the need for public discourse at each step along the traverse of policy formulation and implementation.”
********You can read an abstract of the review at: https://www.aeaweb.org/articles.php?doi=10.1257/jel.53.3.667. You can learn more about Peter Schuck’s book at: http://www.amazon.com/Why-Government-Fails-So-Often/dp/0691161623/. You can learn more about internalities, with graphs, at: http://www.tandfonline.com/doi/pdf/10.3152/146155107X233462. Incidentally, this is one instance where I found Wikipedia to be of no help in providing a definition, its one reference being to a use of the term in behavioral economics. So, someone has an opportunity to create an entry on internalities for Wikipedia. Finally, Charles Wolf, Jr. has written a book that makes extensive use of internalities: Markets or Governments Choosing between Imperfect Alternatives. You can learn more about it at: http://www.amazon.com/Markets-Governments-Choosing-Imperfect-Alternatives/dp/0262731045/.
(8 September 2015): “States to Help Workers Save for Retirement” [SR](http://www.wsj.com/articles/states-to-help-workers-save-for-retirement-1441322951)
——–“The gradual but broad shift away from old-fashioned pensions—which provided lifetime retirement payments to retirees—has left millions of Americans unprepared for retirement, experts say.” As a result, some states have moved “to enact legislation creating automatic individual retirement accounts for workers who don’t have retirement plans at work. The plans are an attempt to cushion the blow for millions of workers who could someday find themselves too old to work but short of savings.” In July, Oregon became the third state to enact such legislation; California and Illinois also have plans. Although the details of the plans vary, the states are considering “automatic paycheck deductions . . . [of] 3%–to be placed in individual retirement accounts. In all three states, workers would be automatically enrolled but would be allowed to opt out.” This year “At least 18 bills have been introduced in 15 states . . . , up from 10 bills in seven states in 2013.”
(9 September 2015): “Water: The New Screen for Investment Risk” (http://www.wsj.com/articles/water-the-new-screen-for-investment-risk-1441768915)
——–“Investors make big decisions based on the outlook of such fundamentals as interest rates and energy costs. What is more fundamental that water? For many companies, not much. Water disruptions potentially can have a significant effect on a company’s supply chain. As a result, money managers, fund managers and individual investors are putting more weight on the potential for water shortages as a risk factor for investments.” An example of the adoption of this perspective is the fund-research firm Morningstar Inc., which “recently said it plans to start grading all mutual and exchange-traded funds on environmental, social and governance factors.” In relation to water, Monika Freyman, a co-author of “An Investor Handbook for Water Risk Integration,” notes: “Investors have the duty and responsibility to do this analysis. They should engage their money managers on these questions and ask if they have a water-risk filter” for assessing investments.
********You can obtain a pdf of the Investor Handbook at: http://www.ceres.org/resources/reports/an-investor-handbook-for-water-integration.
(9 September 2015): “India Ink: Newspapers Boom Where the Internet Doesn’t Reach” (http://www.wsj.com/articles/india-ink-newspapers-boom-where-the-internet-doesnt-reach-1441740780)
——–“These may be tough days for newspapers in the U.S. But in India, the old-school, ink-stained business is booming as more people from smaller cities join the middle class, boosting circulation and advertising revenue. . . . Amar Ujala and other local vernacular newspapers are focused on a rapidly expanding niche, catering to newly prosperous people outside India’s biggest metropolises who prefer to read in their native languages rather than in the English favored by much of the former British colony’s Westernized elite. The number of news consumers in the world’s second-most-populous country has grown along with literacy and disposable income. . . . Many of those consumers are turning to physical newspapers, instead of going online, because they lack computers and smartphones with reliable Internet access. Ironically, online retailers . . . have been snatching up advertising space to reach those rural customers.”
********A brief article that lays out a number of factors influencing the demand for newspapers. In India, it seems, “There has never been a better time for newspapers.”
May you have a good week!