247 (13 January 2016)

Welcome to week 247!  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.

(6 January 2016): “Meet the Two Brothers Making Millions Off the Refugee Crisis in Scandinavia” (http://www.bloomberg.com/features/2016-norway-refugee-crisis-profiteers/)

——–“Oslo-based company, Hero Norway, is the leader of a burgeoning Scandinavian industry that charges the Norwegian and Swedish governments a fixed fee–$31 to $75 per person per night in Norway—to house and feed refugees. . . . For 2015, Hero Norway expects revenue of $63 million, with profits of 3.5 percent.”  The Adolfsen brothers, Kristian and Roger, the owners of Hero Norway, first “set their sights on Sweden” to develop their business.  But soon thereafter “refugee arrivals in Norway exploded, and they’ve kept arriving since. . . . For-profits now care for about 90 percent of Norway’s refugees.”  A “gold rush for refugees” has begun, but “concerns remain.  In their monetization of the refugee crisis, will the Adolfsens provide superior, more efficient havens, or will they cut corners and skimp on services to improve profits?  And does their bottom-line approach threaten a depth of caring that transcends hard cash?”

********A provocative article that raises important questions about which views can (and do) vary greatly.

(7 January 2016): “Study Finds That Weather Disasters Took a Heavy Toll on Crops” (http://www.nytimes.com/2016/01/07/science/study-measures-damage-from-weather-disasters-on-cereal-crops.html)

——–A paper just published in Nature “examined data on the effects, over five decades, of extreme temperatures, floods and droughts on national crop harvests.”  The investigative team “looked at 2,800 weather disasters . . . along with data on 16 different cereals, including oats, barley, rye and maize, grown in 177 countries.  They found that droughts cut a country’s crop production by 10 percent, and heat waves by 9 percent, but that floods and cold spells had no effects on agricultural production levels.”  Geographer Navin Ramankutty, an author of the report, noted that “We don’t think about it much, but rice, wheat and maize alone provide more than 50 percent of global calories . . . When these grain baskets are hit, it results in food price shocks, which leads to increasing hunger.”

********Perhaps the most interesting finding of the study was that “the effects of droughts were more severe for crops produced in developed countries than in underdeveloped countries.  Dry spells caused losses of nearly 20 percent in North America, Europe and the Australasia region, but only 12 percent in Asia and 9 percent in Africa.  They found no significant effects from droughts in Latin America.”  Observing this difference, study co-author Pedram Rohani said that one reason is “developed nations tend to grow more uniform crops, which may be more vulnerable to drought, while underdeveloped countries grow diverse patches of plants that may have greater resilience.”  The article contains a link to the Abstract for the Nature article.

********An article for JSTOR Daily (http://daily.jstor.org/meteorology-changed-agriculture-forever/) continues to develop the relationship between the weather and agriculture, as well as the weather and retail business.  Regarding the latter, there is a link to a story about a furrier in New York City that lost significant sales due to unseasonably warm weather.  Regarding the former, there is a link to a 1920 article—I read it—that takes an informal look at the then-nascent study of the relationships between mathematics, weather, and agriculture.  Clearly the author had a glimpse of where things were going.

********As one final look at the weather and the economy, we have the post “The Economic Impact of El Niño” (http://daily.jstor.org/economic-impact-el-nino/).  The post is constructed around the 2007 paper “Does El Niño Affect Business Cycles?,” which looks for the economy-wide (macroeconomic) effects of El Niño in 22 countries and finds little impact.  The article is of interest for focusing on economies as a whole, rather than regional or local economies.  The discussion in the Conclusion of the 2007 article is of interest as it addresses the question, “Why are our results so weak?”

(8 January 2016): “In the Birthplace of Pizza, Pollution Rules for Ovens Spur Outrage” (http://www.nytimes.com/2016/01/08/world/europe/in-the-birthplace-of-pizza-pollution-rules-for-ovens-spur-outrage.html)

——–The mayor of San Vitaliano, Italy recently issued “an ordinance banning the use of wood-fired stoves not equipped with filters that reduce toxic air pollutants.”  As a result, he has become known as “the anti-pizza mayor.”  His actions came at a time when “dozens of Italian mayors . . . adopted emergency measures last month after a prolonged dry spell repeatedly pushed air pollutants beyond legal limits.”  Italy “is one of the worst countries in Europe for air quality. . . . A 2015 government study found that some 30,000 Italians died as a result of air pollution each year.”  San Vitaliano’s air pollution is somewhat puzzling, as the town is small and has no major industries, and many pizzerias already have air filters due to regulatory requirements.  Residents of San Vitaliano say “they have been wrongly singled out and are being punished because [it] . . . is the only town in the area that has an air quality monitor, which became operational about a year ago.”  Local baker Antonio Mercadante voices his concern, noting “What are the other mayors doing?  They’re pretending like nothing is happening.”  He understood the mayor’s action, but noted “unless other towns took measures . . . [the new ordinance is] ‘just a joke.’”

********This is a nice example of the invisible foot—legal and political forces that affect human behavior—and also illustrates the invisible hand and the invisible handshake—social and historical forces that affect human behavior.  As a child I heard my mother say on a number of occasions, “What if everybody did that?”  It always caught my attention and, I suppose, may have led me to take a course on ethics in college, where I intuited that this question relates to Immanuel Kant’s categorical imperative, i.e., “Act only according to that maxim whereby you can, at the same time, will that it should become a universal law” (https://en.wikipedia.org/wiki/Categorical_imperative).  A related expression, which is relevant to the current article, is “What if nobody else did that?”  As the baker suggests, if San Vitaliano acts but nobody else does, there would be no meaningful change in air quality.  This illustrates a basic problem with addressing “public bads” (https://en.wikipedia.org/wiki/Public_bad), which is often addressed by legal or political means.  Some people, though, go ahead and do it anyway because it is “the right thing to do.”  Sometimes these people become saints.

(8 January 2016): “NC’s income inequality explained in one map” (http://www.newsobserver.com/news/politics-government/politics-columns-blogs/under-the-dome/article53509945.html)

********The map illustrates, but doesn’t explain, income inequality.  What it does illustrate, though, is dramatic.  There are 5 counties in North Carolina that are above the state average (Durham, Forsyth, Mecklenburg, Orange, and Wake) and 95 below.  Of those 95 counties, 90 of them are at least 10 percent below the state average.  Every county in western North Carolina (http://www.carolinapublicpress.org/296/the-counties-of-western-north-carolina) is at least 10 percent below the state average.  In WNC, every county other than Buncombe and Henderson are at least 25 percent below the state average.  The slide was part of a power point presentation made by economist Ted Abernathy.  All of his slides by an accessed at a link at the bottom of the story.

(9 January 2016): “American economic history: G force” (http://www.economist.com/news/books-and-arts/21685437-why-economic-growth-soared-america-early-20th-century-and-why-it-wont-be)

——–Economist Robert Gordon of Northwestern University “has long been famous in academic circles for advancing three iconoclastic arguments.  The first is that the internet revolution is hyped.  The second is that the best way to appreciate the extent of the hype is too look at the decades after the civil war, when America was transformed by inventions such as the motor car and electricity.  The third is that the golden age of American growth may be over.  In “The Rise and Fall of American Growth” Mr Gordon presents his case for a general audience . . . , supporting his argument with vivid examples as well as econometric data, while keeping a watchful eye on what economic change means for ordinary Americans.”

********You can learn more about Gordon’s book at: http://www.amazon.com/Rise-Fall-American-Growth-Princeton/dp/0691147728/.  Additional material is provided in a post “The Rise and Fall of Growth” by David Warsh at: http://www.economicprincipals.com/.  No doubt Gordon’s book will be widely reviewed and read.

(11 January 2016): “Car Insurers Find Tracking Devices Are a Tough Sell” [SR](http://www.wsj.com/articles/car-insurers-find-tracking-devices-are-a-tough-sell-1452476714)

——–For decades, car “insurers have relied heavily on lumping applicants into broad actuarial categories by characteristics such as age, gender and car type to supplement information gathered from driving records.”  Upon this information, insurance rates were arrived at.  Now, however, they “are collecting reams of personal data in hopes of drawing much more tailored conclusions.  The catch is the industry needs its customers’ consent to gather the information, and many customers are wary.”  San Diego driver Shauna Aiken expresses a few shared by many, noting that the information collection “just creeps me out.”  Industries such as “advertising, media and technology are being reshaped by an explosion of personal data” and now auto insurers are looking to see to what extent “Americans are willing to share private details for potential economic benefit.”  Insurers leading the way are Progressive, Allstate Corp., and State Farm; for the moment, Geico is not offering a plan of reduced rates for information about specific driving behavior.  Progressive currently stands out with its “Snapshot” program that monitors driving behavior for only six months.

********Paul Saffo, who teaches forecasting classes at Stanford University, “sees usage-based pricing as ‘probably inevitable long-term” as “U.S. consumers have shown in recent decades a willingness to sacrifice privacy for convenience, and he believes they will continue to do so even as they complain.”  It will be interesting to see to what extent this insurance product is affected by the ongoing development of autonomous cars.  Will all autonomous cars behave similarly?  You can learn more about the challenges being faced by car insurers at: http://www.nytimes.com/2016/01/08/automobiles/insurers-brace-for-the-self-driving-future-and-fewer-accidents.html.

(11 January 2016): “Company Behind Methane Leak Is Ordered to Offset the Climate Damage” (http://insideclimatenews.org/news/10012016/california-methane-leak-so-cal-gas-company-ordered-offset-carbon-emissions-climate-change-governor-brown)

——–On January 6th California Governor Jerry Brown declared a state of emergency regarding the ongoing methane gas leak at Porter Ranch in the Aliso Canyon of Los Angeles.  In that declaration, he directed “The California Air Resources Board, in consultation with appropriate state agencies, shall develop a program to fully mitigate the leak’s emissions of methane by March 31, 2016.”  The program “shall be funded by the Southern California Gas Company, be limited to projects in California, and prioritize projects that reduce short-lived climate pollutants.”  According to Mark Brownstein of the Environmental Defense Fund, “This is such a dramatic case that almost by definition it’s going to break new ground in terms of our understanding of the challenge that is in front of us, from a regulatory standpoint, and from a business practice standpoint.”  Brownstein went on to say that “It’s not entirely clear what statutory or regulatory authority the State of California has to require SoCal to pay.”

********Since the well’s rupture on October 23rd, its cumulative emissions “equal approximately 2 percent of all natural gas industry emissions nationwide over the course of a year.”  This clearly seems, and appropriately so, to be a case of act now and figure out the law later.

(12 January 2016): “Word of the year candidate ‘gig’ reflects a new economic order” (http://www.latimes.com/business/technology/la-fi-thedownload-gig-20160112-story.html)

——–[University of California-Berkeley linguist Geoffrey Nunberg proffers his nomination for word of the year.]  For “my word of the year, I offer you the revival of ‘gig’ as the name for a new economic order.  It’s the last chapter in the life of a little word that has tracked the rise and fall of the great American job.”  Although ‘gig’ goes back “more than a century as musicians’ slang for a date or engagement,” its more recent history dates back to a 1952 piece by Jack Kerouac, the sense being that a gig didn’t define you.  The subsequent evolution of ‘gig’ has held varying shades of meaning.  “The Financial Times explains that in the future, work will be less secure, but lots more exciting.  We can make our own schedule and hours, pick the projects that interest us, work from anywhere and try our hands at different trades.  The buzzwords fly thick and fast here—we’ll be ‘solopreneurs’ and ‘free-range humans’ with ‘portfolio careers.’ . . . But that language doesn’t get at most of the people who are cut loose in the new economy and who aren’t exactly reveling in the independence it gives them—the ill-paid temps and contingent workers that some have called the ‘precariat.’”

********Last Friday night the American Dialect Society chose gender-neutral singular ‘they’ as its 2015 word of the year (http://www.americandialect.org/2015-word-of-the-year-is-singular-they).  Although ‘gig’ seems not to have been in the running, Geoffrey Nunberg provides a valuable instance of the evolution of a word that will be increasingly used in the future.  He notes in closing that, “the idea of a gig is alluring only if you know you can hit the road when it gets joyless.  Otherwise it’s just an old word for a job you can’t count on having tomorrow.”  That’s the way it is in the ‘precariat’.

********Inside the article is a link to a seven-minute radio broadcast by Nunberg on the NPR program “Fresh Air.”  The words are almost identical but you get his intonation, too, which added a lot for me.

(13 January 2016): “How to Profit From Rising Rents: Build Apartments” [SR](http://www.wsj.com/articles/how-to-profit-from-rising-rents-build-apartments-1452614388)

——–“After six years of rising apartment rents in U.S. cities, investors from all corners of the real-estate industry are piling into new projects in a bet that the boom still has a long way to run.  Over the next three years, developers are expected to build almost one million apartments in the U.S., more than the nearly 900,000 constructed over the previous three . . . The main lure for investors: rising rents.  Average rents nationwide rose 4.6% in 2015, the biggest gain since before the recession . . . The average monthly U.S. apartment rent now stands at nearly $1,180.”  There is concern, however, that the apartments be built are too narrowly focused, some analysts noting that “most of the new construction has been aimed at the top 20% of the market.  In all, 82% of the units build from 2012 to 2014 in 54 major U.S. metropolitan areas are classified as luxury developments.”  Regarding this, New York-based appraiser Jonathan Miller comments, “With all the new product being created skewed to luxury . . . we’re building lots of rental product but it doesn’t necessarily match up with what the demand really is.”

********As the article points out, higher apartment rents have led some firms into rental construction that had previously specialized in office or retail construction.

(13 January 2016): “Who Buys Lottery Tickets?” (http://daily.jstor.org/the-desperation-lottery/)

——–With the Powerball lottery at an estimated $1.5 billion, the interest in lotteries has never been greater.  So, who buys lottery tickets?  That question was examined in a 2007 article in The American Journal of Economics and Sociology.  In it the authors “analyze what they call the desperation and entertainment hypotheses of lottery consumption.  While middle class and wealthier lottery consumers may indeed play for fun, the poor are more ‘likely to view the lottery as an effective investment tool.’  Their study, using data from 39 states over ten years, found strong support for the desperation hypothesis.”

********Even a retired economist considered buying a lottery ticket (but didn’t).  My scan of the article indicates that it is a good example of conventional neoclassical economics, i.e., model building and hypotheses tested by data.

May you have a good week!

Bruce

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