254 (2 March 2016)

Welcome to week 254!  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.

(25 February 2016): “Vietnam Tries New Tack in Climate-Change Battle: Teach a Man to Fish” [SR](http://www.wsj.com/articles/vietnam-tries-new-tack-in-climate-change-battle-teach-a-man-to-fish-1456356381)

——–“Vietnam’s economic planners have set out on what could be their biggest-ever engineering project: A network of walls designed to hold back rising sea levels that are swamping fertile rice-growing regions.”  Some rice farmers, though, are not waiting for the networks, deciding instead to raise fish rather than grow rice.  In the Red River Delta of northern Vietnam, “Nearly three-quarters of households in Nam Dien have abandoned rice farming. . . . The shift is focusing attention on a difficult question: Is it better to invest resources in fighting the effects of climate change, or in helping people adapt?”  Although Vietnam’s initial response was to build a wall to produce the rice farmers, there are signs that government officials are thinking more seriously about helping “rice farmers switch to raising fish, rather than fighting environmental changes.”  But it isn’t easy.  “Farmers have to learn a whole new way of working, from filtering water to investing in healthy fingerlings.”  Then there is the problem of land, which potential fish farmers must acquire to produce.

********Vietnam’s challenge is one shared by other countries was large river deltas that are farmed and highly populated.  The Ganges and Nile deltas, too, “are already feeling the effect of environmental changes.”  In the lower reaches of Vietnam’s Mekong delta, “saltwater is penetrating as far as 60 kilometers (37 miles) inland during the dry season, according to government meteorologists, killing crops and forcing farmers to leave or find a new way of making a living.  Some 30 million people live in the Mekong delta, with 18 million more in the Red River delta.”

(26 February 2016): “Decline of Pollinators Poses Threat to World Food Supply, Report Says” (http://www.nytimes.com/2016/02/27/science/decline-of-species-that-pollinate-poses-a-threat-to-global-food-supply-report-warns.html)

——–According to the “first global assessment of the threats to creatures that pollinate the world’s plants” without “an international effort . . . increasing numbers of species that promote the growth of hundreds of billions of dollars’ worth of food each year face extinction. . . . Pollinators, including some 20,000 species of wild bees, contribute to the growth of fruit, vegetables and many nuts, as well as flowering plants.”  The reasons for the pressure on pollinators include agricultural practices, pesticides, parasites, pathogens, and climate change.  The research group issuing the assessment, the Intergovernmental Science-Policy Platform on Biodiversity and Ecosystem Services, “did not conduct new research, but synthesized current studies and analysis to reach its conclusions.”

********Although the article reported that the summary of the report would be posted online (http://www.ipbes.net/work-programme/pollination) on February 29th, I was unable to find it.  However, I did find a 22-page document that provides some perspective on the work: http://www.de-ipbes.de/media/content/PEREIRA_IPBES%20Scenarios%20-%20German%20Forum.pdf.  I found the NYT article to be intriguing because the impact of the pollinator distress was indicated solely in terms of dollars and jobs, and nothing was said about the human (and other) lives that would be lost and diminished due to the reduction of “pollinator services,” i.e., food.

********The production of almonds is one of the foods that is totally dependent upon pollinator services—those provided by honey bees.  Almond production largely takes place in California, where there are “nearly 1 million acres of almond orchards” and each acre requires two bee hives.  This gives rise, each year, to a “huge migration of keepers and their bees who trek . . . from as far as Florida and New Jersey for what has been called the planet’s largest ‘managed pollination’ event.”  Almond growers pay “up to $180 to rent one hive for a couple of weeks.”  You can learn about the almonds, bees, and threats to bees at: http://www.latimes.com/local/abcarian/la-me-abcarian-bees-almonds-20160226-column.html.

(26 February 2016): “Turning Polluted Properties Into Profits” (http://www.nytimes.com/2016/02/27/your-money/turning-polluted-properties-into-profits.html)

——–Environmental engineer Matthew Winefield buys contaminated properties with the intention of turning a profit on them.  Winefield, and people like him, “are getting backing from wealthy investors who have the resources, the patience and the desire to return the properties to productive use—all for an expected profit. . . . As investments, the returns range from enticing to frightening.  Mr. Winefield says the profit at the Garden Grove site might eventually be four times the initial investment.  But if what is below the ground is worse than their research says, they could end up making little or losing money.”  For many sites, investment viability hinges of finding “older insurance policies” for them.  “Thomas dearth, a hydrogeologist by training, owns both an insurance archaeology company that finds these policies and Genesis Engineering & Redevelopment, which cleans up contaminated sites.”

********I was struck by the term ‘insurance archaeology.’  It turns out that this an established term if new to me.  Most of the Internet information relates to particular firms, so here is one link I found that seems instructive: http://www.rmfields.com/about.html.  Just as one can buy a property with lingering contamination issues, so might one inherit a property with possible contamination issues.  This topic was addressed in an earlier article, “Contaminated Property Makes for Costly Inheritance” (http://www.nytimes.com/2016/02/20/your-money/contaminated-property-makes-for-costly-inheritance.html).

********While on the topic of polluted properties, there is the related case of the commerce of potentially injurious materials.  Lead car batteries is one such case.  “While U.S. politicians express outrage over elevate lead levels in drinking water in Flint, Mich., they have done little to stem the flow of car batteries—each containing about 20 pounds of lead—south of the border.  Officials estimates that the number of old batteries shipped to Mexico has grown by more than 400 percent in the past decade, spurred in part by tougher U.S. laws. . . . As many as 1 in 5 lead-acid batteries from American vehicles . . . end up nowadays in Mexican recycling plants, to be broken down by workers under conditions that range from adequate to abysmal, according to U.S. consultants who have studied the industry.”  According to Tim Whitehouse, an attorney who has investigated Mexican battery smelters, “We’ve seen places where workers literally break open batteries with axes.”  As such, instances of lead poisoning of workers are common, although not often reported due to the fear of losing one’s job.  The article this is taken from is “A dangerous export” (https://www.washingtonpost.com/classic-apps/a-dangerous-export/2016/02/26/3c093b32-d199-11e5-b2bc-988409ee911b_story.html).

********Another type of exported pollution is carbon-based and probably the most widely advocated approach (by economists) toward reducing that pollution is the imposition of a carbon tax.  British Columbia has had a carbon tax since 2008, when “the British Columbia Liberal Party, which confoundingly leans right, introduced a tax on the carbon emissions of businesses and families, cars and trucks, factories and homes across the province. . . . Their experience shows that cutting carbon emissions enough to make a difference in preventing global warming remains a difficult challenge.  But the most important takeaway for American skeptics is that the policy basically worked as advertised.”  You can learn more at: http://www.nytimes.com/2016/03/02/business/does-a-carbon-tax-work-ask-british-columbia.html.  Sweetening the deal was the provision of the bill ensuring “every single carbon tax dollar would be returned to families and businesses through a variety of breaks.”

(29 February 2016): “The New Oil-Car Storage Space: Railcars” [SR](http://www.wsj.com/articles/the-new-oil-storage-space-railcars-1456655405)

——–“The U.S. is so awash in crude oil that traders are experimenting with new places to store it: empty railcars.  Thousands of railcars ordered up to transport oil are now sitting idle because current ultralow crude prices have made shipping by train unprofitable.  Meanwhile, traditional storage tanks are running out of room as U.S. oil inventories swell to their highest level since the 1930s.”  Such uses are called “rolling storage.”  One company using this type of storage is Musket Corp.  According to managing director J.P. Fjeld-Hansen, the company “tested using railcars for storage last year and found he could profit by putting the oil aside while locking in a higher price to deliver it in a later month.”  Railcars, supplement traditional oil tanks, as do underground salt caverns and floating storage, i.e., oil tankers.  Storage in salt caverns can cost “25 cents a barrel each month, while storing crude on railcars costs about 50 cents a barrel and floating store can cost 75 cents or more.”  Loading and transportation costs are not included in those estimates.

********This is a convenient opportunity to discuss the difference between the amount of a good in existence and the supply of that good, which is particularly important when a good, like oil, is storable and undergoes no deterioration during storage.  The amount of a good in existence is what owners are able to provide at a particular point in time but the amount of a good that owners supply is what owners are willing and able to provide at a particular point in time.  So, in anticipation of future price increases for oil and low enough storage costs, oil owners choose not to supply.  This is a very general idea and applies to all good that are storable and undergo no deterioration during storage.  If deterioration takes place, the distinction still holds but matters are somewhat more complex.  Interest rates and inflationary expectations, which are both aspects of the opportunity cost of oil storage, enter in, too.

********In a related article, “U.S. Shale Oil Drillers are Finally Buckling” (http://www.bloomberg.com/news/articles/2016-02-25/u-s-shale-oil-drillers-are-finally-buckling-as-opec-pumps-on), evidence is provided that shale oil and natural gas producers are projecting significant cuts for 2016, with Apache leading the way with a production cut of 11%.  It and other producers, facing “crude prices near a 12-year low, . . . are deciding it’s best to keep their barrels in the ground.”  I.e., crude in the ground is another way to store oil and natural gas.  Contained in the article is a dynamic graphic that shows “five years of oil drilling collapse in seconds.”  You can go to it directly: http://www.bloomberg.com/graphics/2016-oil-rigs/.  The graphic allows you to look at county- and state-level information for the number of oil rigs that are vertical, horizontal, and both.  I found it to be interesting to look at state-level information and then look at horizontal and vertical rigs.  It clearly shows the dramatic change in the oil landscape made by horizontal drilling methods.

********One of the outcomes of the shale oil and gas “revolution” has been the exportation of oil and gas from the U.S. for the first time in many years.  As a result, Europe is now (or will soon be) less dependent upon the sometimes politically-motivated export practices and pricing of Russia, which have been influenced by its monopoly supplier of natural gas.  As noted by Maros Secovic, the energy chief of the European Union, “Like shale gas was a game changer in the U.S., American gas exports could be a game changer for Europe.”  You can learn more about the changed game in “With U.S. Gas, Europe Seeks Escape From Russia’s Energy Grip” [SR](http://www.wsj.com/articles/europes-escape-from-russian-energy-grip-u-s-gas-1456456892).

(1 March 2016): “Do National Parks and Monuments Make Economic Sense?” (http://daily.jstor.org/national-parks-economic-sense/)

——–“On February 12th, President Obama designated three new national monuments in California.”  The President “has protected more acres of land and water (over 265 million) than any previous President, in designations that have at times been politically contentious.”  Although national parks and monuments “can harm local economies in some situations, . . . they can also boost the economies of surrounding towns and cities in other situations.  It’s a truth that both environmentalists and business advocates would do well to consider.”

********This JSTOR Daily piece is based upon the article “Economic Development and Preservation: The Case of National Parks”, by Lay James Gibson and Bryant Evans, which is linked to the article.  As every two-armed economist (http://www.barrypopik.com/index.php/new_york_city/entry/one_armed_economist_who_doesnt_say_on_the_other_hand), the answer to such question is always “it depends.”  In this case, it depends upon the net costs and benefits, broadly considered, of the monument or park in relation to alternative uses.

(2 March 2016): “Tenure Voting Could Shift the Balance of Corporate Power” (http://www.nytimes.com/2016/03/02/business/dealbook/tenure-voting-rewards-the-shareholder-for-sticking-around.html)

——–“A great divide exists in the voting power of shareholders in the United States.  The majority of American companies have one share, one vote, but more and more companies are going public with a dual-class stock structure.  Here, the voting power rests in the hands of the founders or another group of shareholders.  It’s time to consider an alternative: ‘tenure voting,’ a system in which shareholders accumulate more votes the longer they hold stock.”  Such voting would escape the cultures of “haves” and “have-nots” that results from the increasingly-popular dual-class stock and would allow “companies to reward longer-term shareholders” while also reducing the influence of day traders and activist investors.

********This article is based upon a 41-page paper recently released by the author of this article and two collaborators, “Tenure Voting and the U.S. Public Company,” a pdf of which can be accessed by a link in the article.  A new idea for me and one worth learning more about.  In contrast to political voting where the notion of one person, one vote seems obvious and natural, it appears that corporate voting can and does take many different forms.

May you have a good week!

Bruce

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