256 (16 March 2016)

Welcome to week 256!  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.

(10 March 2016): “After 15 years, Unilever settles with Indian factory workers over mercury poisoning” (https://www.washingtonpost.com/news/worldviews/wp/2016/03/09/after-15-years-unilever-settles-with-indian-factory-workers-over-mercury-poisoning/)

——–“In a significant victory for the Indian factory workers affected by mercury poisoning, the global consumer products company Unilever announced on Wednesday a welfare compensation that brings a long and angry battle to an end. . . . The settlement negotiated between the company and the workers was endorsed by the Madras High Court in the southern state of Tamil Nadu on Wednesday. . . . Unilever’s Indian subsidiary began producing thermometers in Kodaikanal in 1984, after it closed its Watertown, N.Y. site in the early 1980s.  But the factory was shut down in 2001 when the local pollution control board said it was violating environmental norms.”  Although a settlement has been reached with workers and the company, the issue of environmental cleanup remains to be settled.

********This article, as well as “Voters skeptical on free trade drive Sanders, Trump victories in Michigan” (https://www.washingtonpost.com/politics/voters-skeptical-on-free-trade-drive-sanders-trump-victories-in-michigan/2016/03/09/455e1704-e619-11e5-bc08-3e03a5b41910_story.html), got me to thinking about lags, i.e., the passage of time between action and consequence, between stimulus and response.  Fifteen years between the closing of a plant and settlement with its workers is impressive (if not unprecedented).  The connection to “free trade” article is that there is often a considerable time lag between trade liberalization and its consequences. In the meantime, people lose their jobs, their dreams, and their self-respect.  The point of this is to say that we ignore lags at our peril.

********A nice summary of the different types of lags—developed in the context of macroeconomic policy but perfectly general—can be found at: http://economistsview.typepad.com/economistsview/2008/12/policy-lags.html.  Five lags named and elaborated upon: data, recognition, legislative, implementation, and effectiveness.  In a general way, it takes time for measurements to take place (data) and then it takes time to interpret the meaning of the data (recognition).  Then, passing laws and creating rules takes time (legislative), as does putting the laws and rules in place (implementation).  Finally, once laws and rules are in place, it takes time for them to affect behavior (effectiveness).  Each of these lags is subject to expansion (or contraction) based upon the complexity of the system in which it is embedded.  It is no surprise, then, that the time lags of climate change and its mitigation are so very long.

(12 March 2016): “States Move to Control How Painkillers Are Prescribed” (http://www.nytimes.com/2016/03/12/business/states-move-to-control-how-painkillers-are-prescribed.html)

——–“A growing number of states, alarmed by the rising death toll from prescription painkillers and frustrated by a lack of federal action, are moving to limit how these drugs are prescribed. . . . The states’ push points to a looming change affecting how doctors use narcotic painkillers, or opioids, which are the most widely prescribed class of medications in the United States. . . . The governor of Vermont, Peter Shumlin, said in an interview that states were taking action because drug industry lobbyists had the ability to block federal initiatives.”  According to the American Academy of Pain Management, there are currently “about 375 proposals in state legislatures that would regulate pain clinics and several aspects of prescribing painkillers”

********The article goes on to note that “The use of opioids began to skyrocket in the 1990s in the face of claims by pharmaceutical companies and medical experts that opioids could be used to treat conditions like back pain and arthritis without fear of addicting patients.”  But the misuse and abuse of opioids became rampant.  I find the notion that pharmaceutical lobbyists are less effective at the state level than the national level to be intriguing.  Perhaps a misallocation of lobbying resources by drug companies?

(12 March 2016): “Culture Gap Impedes U.S. Business Efforts for Trade With Cuba” (http://www.nytimes.com/2016/03/13/world/americas/culture-gap-impedes-us-business-efforts-for-trade-with-cuba.html)

——–“They have gone to Cuba with plans to build houses.  To assemble tractors.  to buy apps from young programmers.  Even to import charcoal . . . But 15 months after American prospectors began swarming Havana, filling hotels and hiring consultants, only a handful have inked deals to do business with the once-forbidden island.”  Contributing to the lack of trade have been the continuing, although lessening, restrictions placed upon trade by the U.S. government, as well as the Cuban government’s unwillingness to “alter the way it does business to suit American needs.”  So, “threading the needle between Cuba’s rigid rules and the restrictions that the United States continues to impose is tricky.”  The president of the U.S.-Cuba Trade and Economic Council, John S. Kavulich, indicates that between “500 visits to Cuba by American businesspeople since December 2016 and more than 140 visits by United States representatives and officials” the number of business deals made could be counted on his fingers.

********The article title suggests that it is culture (the invisible handshake) at work but the article content suggests that the legal system (the invisible foot) at work.  Perhaps this is simply a case in which there is no tidy distinction between handshake and foot, i.e., that the two are part of an interdependent system.

(14 March 2016): “Why ‘dynamic’ pricing based on real-time supply and demand is rapidly spreading” (http://www.latimes.com/business/la-fi-agenda-dynamic-pricing-20160314-story.html)

——–“Walt Disney Co.’s move to lift prices at Disneyland and its other theme parks on busy days was a novel step for the entertainment giant, but the news made perfect sense to Robert Crandall.  The former chair of American Airlines employed a version of the same tactic nearly 40 years ago when Crandall pioneered ‘super-saver’ fares, with ticket prices constantly being adjusted based on seat availability, passenger demand and how far in advance customers made reservations.  What Crandall did then, and what Disney is doing now, part of what’s called ‘dynamic’ or ‘surge’ pricing, and the practice is rapidly spreading in both the private and public sectors.”  This pricing approach first used by Crandall and now spreading widely has been enabled by “advances in computer power” and a variety of technologies that “have made it easier for companies and government agencies to forecast how demand for their products and services will change and how quickly.”

********Interesting to see a more historical approach given to dynamic pricing.  It certainly seems like the airlines were an ideal place to first put them to use.  The article notes that there are now a number of firms selling services that will enable firms to use dynamic pricing.  All this moves us a little bit closer to the situation where each unit of each product is sold at a different price to different buyers with different preferences and different ability to buy.  This is what is known as first-degree (perfect) price discrimination.  You can find a definition and additional discussion at: http://www.economicsonline.co.uk/Business_economics/Price_discrimination.html.

(14 March 2016): “Inside the Billion-Dollar Dig to America’s Biggest Copper Deposit” (http://www.bloomberg.com/features/2016-arizona-copper-mine/)

——–“The entrance to America’s deepest mine shaft sits on a plateau high above the Arizona desert, about an hour east of Phoenix. . . . What looks like a large capital A rises above its entrance.  It’s the steel headframe used to hoist equipment in and out of the shaft, a concrete tube 30 feet wide that goes 6,943 feet straight down.”  This is a joint venture between “the two largest mining companies in the world, Rio Tinto and BHP Billiton.  Together they’ve spent more than $1 billion . . . in hopes of tapping nearly 2 billion metric tons of [copper] ore.”  This is the “fourth-largest undeveloped copper deposit in the world.”  It is expected that by the time the first copper is removed, 2020, Rio Tinto “and BHP will have spent more than $7 billion.”  All this comes at a time when the price of “Copper is 50 percent cheaper than it was in 2011, and mining companies have lost billions of dollars in value . . . [and mines] are shutting down.”

********The discussion of the mine is simply amazing—I have nothing but admiration for the people who palpably risk their lives to do this work.  The article indicates the challenges of mining, in general, and the specific challenges of this particular mine, which include working with the members of the San Carlos Apache Indian Reservation and the U.S. Forest Service.  Then there is the uncertainty about prices and the unforeseen engineering problems that accompanies an unprecedented project.  One thing is very clear, though: the project will permanently change the landscape of Arizona.  The mining process will use a method called “block caving,” which causes the land above it to sink.  Once the ore is removed, “Models suggest that for every 100 feet of ore that’s mined, the surface could subside 30 feet.  Which would mean that by the time the mine is depleted, after about 50 years of production, there could be a crater in the ground 2 miles across, and 1,000 feet deep, right on the edge of one of the country’s largest national forests.”  Breathtaking.

(14 March 2016): “Lloyd Shapley dies at 92; UCLA professor won Nobel for game-theory work” (http://www.latimes.com/business/la-fi-lloyd-shapley-20160314-story.html)

———“Lloyd S. Shapley, a researcher of strategic decision-making called game theory who shared the 2012 Nobel Prize in economics, has died.  He was 92. . . . Shapley was 89 and professor emeritus at UCLA when the he received the . . . Prize . . . for his work half a century earlier that analyzed match-making in markets.  He shared the prize with Alvin Roth, who teaches economics at Harvard and Stanford.”  After learning of the award, Shapley commented: “I consider myself a mathematician, and the award is for economics . . . “I never, never in my life took a course in economics.”

********Shapley’s comment that he never took a course in economics is interesting.  Evidently psychologist Daniel Kahneman, who also won the Prize in economics, also never took a course in economics (http://economix.blogs.nytimes.com/2009/10/14/are-non-economists-suddenly-taking-over-the-economics-nobel/).  Clearly, studying economics is not a necessary condition for top performance in the discipline.  The economix blog at the preceding link provides more examples of top-flight work by non-economists.

********There are many additional remembrances of Shapley and there will be many more.  Here are two more that are informative.  First, “Matchmaker in heaven: Lloyd Shapley, a Nobel laureate in economics, has died” (http://www.economist.com/blogs/freeexchange/2016/03/matchmaker-heaven).  It provides an informal discussion of the Gale-Shapley matching algorithm which grew out of an informal conversation with David Gale.  That algorithm figured prominently in Shapley receiving the Nobel Prize and is now widely used in a variety of contexts, including school assignment in New York City (http://www.nytimes.com/2014/12/07/nyregion/how-game-theory-helped-improve-new-york-city-high-school-application-process.html).  Second, “Lloyd S. Shapley, 92, Nobel Laureate and a Father of Game Theory, Is Dead” (http://www.nytimes.com/2016/03/15/business/economy/lloyd-s-shapley-92-nobel-laureate-and-a-father-of-game-theory-is-dead.html).  It provides information on the “Shapley value,” which is “a concept through which the benefits of cooperation can be proportionally divided among participants based on their relative contribution.”   As a final comment, it is worth noting in this “political season” that Shapley partnered with Martin Shubik (http://economics.yale.edu/people/martin-shubik) to develop the Shapley-Shubik power index (https://en.wikipedia.org/wiki/Shapley%E2%80%93Shubik_power_index), which measures “the powers of players in a voting game.”  In this literature, “sequential coalitions” and “pivotal players” play a role.  You can learn more at: http://www.ctl.ua.edu/math103/POWER/wtvoting.htm.

 

(15 March 2016): “The U.S. Government’s Warning to Courts That Jail The Poor” (http://www.theatlantic.com/national/archive/2016/03/department-of-justice-open-letter/473742/)

——–“The U.S. Department of Justice has sent a rare open letter to state judges asking them to stop practices that threaten jail time for people who cannot afford to pay fines.  The letter, sent Monday, is signed by Vanita Gupta, the top prosecutor for the Justice Department, and Lisa Foster, who runs a division focused on helping poor people gain access to legal aid.”  The letter takes issue with practices that make “courts seem as if they’re not concerned with ‘addressing public safety, but rather toward raising revenue.’”  The letter notes that in many cases such practices “can be unlawful.”

********The article has a link to the letter, which is reproduced here: https://www.justice.gov/crt/file/832461/download.  I’ve seen such “Dear Colleague” letters from the U.S. Department of Education, so they must be a standard type of communication used by the Federal Government.  I was initially drawn to this topic by an earlier article in The New York Times, “Justice Dept. Condemns Profit-Minded Court Policies Targeting the Poor” (http://www.nytimes.com/2016/03/15/us/politics/justice-dept-condemns-profit-minded-court-policies-targeting-the-poor.html).

********This article brings to mind that not only do the poor pay more, as noted in “Why the poor pay more for toilet paper—and just about everything else” (https://www.washingtonpost.com/news/wonk/wp/2016/03/08/why-the-poor-pay-more-for-toiletpaper-and-just-about-everything-else/), they are also dealt with more harshly by the legal system.  Perhaps the Dear Colleague letter will catch the attention of some judges, municipalities, and states.

(16 March 2016): “Companies Step Up Efforts to Reveal More Details on Food You Eat” [SR](http://www.wsj.com/articles/companies-step-up-efforts-to-reveal-more-details-on-food-you-eat-1457894072)

——–“Fish + People Inc. has been posting on its website the names and photos of the boat captains that caught fish for its new Fishpeople-brand packaged seafood meals and frozen filets over the past three years.  Many shoppers are hooked. . . . From niche players such as Fish + People to large enterprises such as Campbell Soup Co. and Wal-Mart Stores Inc., companies are rushing to meet consumers’ increasing demand to know more about what’s in their food, where it came from, and how it was produced. . . . Driving the efforts are consumers’ heightened concerns about health and the environmental and social impact of food production, as well as regulatory and safety worries.”  The movement to greater transparency about production and content has been aided by the 2011 Food Safety Modernization Act.

********Some people certainly want to know more about the production and content of their food, and it seems like some companies are willing to provide it.  Thinking about this, I can understand some reluctance of some to provide this information, as each additional bit of information could be wrong, and likely will be wrong, over time, thereby exposing firms to litigation.  Related to this is an earlier article from Bloomberg: “German Beer Purity Under the Microscope as Weedkiller Found” (http://www.bloomberg.com/news/articles/2016-02-26/german-beer-purity-under-the-microscope-as-weedkiller-found).  In Germany, the land of the famed Reinheitsgebot, the beer purity law that prescribes the ingredients for beer (https://en.wikipedia.org/wiki/Reinheitsgebot), glyphosate (the key ingredient in Roundup) was found in the country’s 14 best-selling beers.  The study was performed by the Munich Environmental Institute.  As the MEI noted, “In absolute numbers, the level of glyphosate is low . . . But it does contribute to the overall levels of chemicals consumers are exposed to—hops, barley and malt can be produced without using it.”  Here is a more detailed article, with pictures of the 14 beers (http://www.dw.com/en/glyphosate-weed-killer-found-in-german-beers-study-finds/a-19072785).  From what I have been able to gather, no similar study has been done for beers in the U.S.  One can start to see how complicated a full listing of “ingredients” might become.

(16 March 2016): “The World Happiness Report Is Out.  Parents, Why Aren’t You Happier?” (http://www.bloomberg.com/news/articles/2016-03-16/ask-yourself-are-you-happier-now-than-you-were-10-years-ago)

——–“Reported contentment in the U.S. declined from 2005-2007 to 2013-2015, according to the latest World Happiness Report. . . . The U.S. came in 93rd out of 126 countries ranked by changes in national effervescence.”  Nicaragua had the largest happiness gain, while Greece had the largest happiness loss.  Regarding absolute levels, however, Western European social democracies were at the top of the list.  In order, Denmark, Switzerland, Iceland, and Norway.  The United States was thirteenth.

******** I liked the clear distinction in the article between total amounts and changes in total (marginal) amounts.  It would be nice if this was a general practice.  Here is the link to the Report: http://worldhappiness.report/.  It would be interesting if something like this was done for each state.  There is something along these lines at: https://wallethub.com/edu/most-least-happy-states-in-america/6959/.  Note, though, that there is no reference to changes in state happiness.

May you have a good week!

Bruce

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