280 (31 August 2016)

Welcome to week 280!  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.

(22 August 2016): “Putting Garbage Out of Sight” (http://daily.jstor.org/putting-garbage-out-of-sight/)

——–“For years, much of the recycling Americans set out at our curbs has ended up in less wealthy countries like China and India, but not these countries are putting more limits” on the industry.  Indeed, the history of scrap sellers and recyclers is replete with recognition of the danger and undesirability of working in the industry, as well as the ease of entry into the business.  Because it was “an easy business for immigrants with few other options to enter . . . scrap dealers were largely Jewish immigrants” by the early twentieth century.  Intense competition among many small dealers merged with “anti-immigrant and anti-Semitic stereotypes” contributed to the general distrust of junk sellers among the public.  This distrust led to increased regulation of scrap sellers and drove their businesses away from public view, indeed, across the world in recent years.  “But the growing resistance from foreign governments may force us to pay more attention to this dirty work.”

********This concise summary draws upon all three invisible forces: competition among dealers (Invisible Hand), regulation (Invisible Foot), and prejudice (Invisible Handshake).  For more detail, see the base article “Dirty Work: How Hygiene and Xenophobia Marginalized the American Waste Trades, 1870-1930,” by Carl Zimring.  The full reference is provided at the link.

********As I thought about this, I wondered “How does Zimring’s work connect with environmental racism?”  Having asked the question, I did a search and found that he had just published a book on the subject, Clean and White: A History of Environmental Racism in the United States.  You can learn more about it at: https://www.amazon.com/Clean-White-History-Environmental-Racism/dp/1479826944/.

(25 August 2016): “The ginseng web” (http://www.bostonglobe.com/ideas/2016/08/25/the-ginseng-web/JTYJQLIo33SNCBhwhpqGJO/story.html)

——–The discovery of ginseng in North America grew out of a 1711 letter from a Jesuit missionary in China who speculated, upon his knowledge of the climatic conditions in China, that “if ginseng were found growing wild in any other part of the world, it likely would be Canada.”  The circulated widely in Jesuit circles and Joseph-François Lafitau, who was stationed near Quebec, searched and found ginseng “growing close by a mission lodge.”  As a result of his discovery, “International trade would never be the same.”  This story, related by Harvard historian Shigehisa Kuriyama, appears in the forthcoming book The Botany of Empire in the Long Eighteenth Century.  “The book examines how the growing global traffic in plants—for medical, economic, and scientific purposes—shaped colonial expansion in the 1700s.”

********You can learn more about the book, and the Symposium upon which it is based, at: http://news.harvard.edu/gazette/story/2016/08/beauty-inside-and-out/.  A related and well-known book is Ecological Imperialism: The Biological Expansion of Europe, 900-1900 (https://www.amazon.com/Ecological-Imperialism-Biological-Expansion-Environment/dp/0521546184/), by Alfred W. Crosby.  It brings to mind, too, The Botany of Desire: A Plant’s-Eye View of the World (https://www.amazon.com/Botany-Desire-Plants-Eye-View-World/dp/0375760393/), by Michael Pollan.

(28 August 2016): “Feds use Rand formula to spot discrimination.  The GOP calls is junk science” (http://www.latimes.com/business/la-fi-rand-elliott-20160824-snap-story.html)

——–Marc Elliott, a statistician who works for the Rand Corporation, is the developer of an algorithm that is used to estimate “the probability that someone is white, black, Asian or Hispanic based only on their address and last name.”  The algorithm employs Bayesian Improved Surname Geocoding (BISG) and has been used in a variety of contexts in which discrimination was expected.  Most recently it was employed by the Consumer Financial Protection Bureau (CFPB) and resulted in an $80 million payment by Ally Financial due to its lending history.  In fact, “The CFPB has used BISG “to accuse some of the country’s largest auto lenders, including the financing arms of Toyota and Honda, of discrimination.”

********You can learn more about the CFPB’s use of BISG in the 37-page pdf “Using publicly available information to proxy for unidentified race and ethnicity: A methodology and assessment” (http://files.consumerfinance.gov/f/201409_cfpb_report_proxy-methodology.pdf).  The original 2009 research paper by Elliott, et al., is referenced in the pdf.  As Elliott notes in the article, the algorithm is intended to be used for groups, not individuals.  Thus the problem arises that discrimination might be found but the particular people discriminated against may be difficult to identify.  That is evidently part of the reason why some legislators have called the BISG-based work of the CFPB “junk science.”  This problem of identification was mentioned in “U.S. Government Uses Race Test for $80 Million in Payments” [SR](http://www.wsj.com/articles/u-s-uses-race-test-to-decide-who-to-pay-in-ally-auto-loan-pact-1446111002).  Giving the present, and likely future, interest in all types of discrimination, we can expect to see broader use of the Elliott algorithm.

********Although only indirectly related, this is a good opportunity to mention Weapons of Math Destruction: How Big Data Increases Inequality and Threatens Democracy, a review of which can be read at: http://www.bloomberg.com/news/articles/2016-08-24/a-math-nerd-wants-to-stop-the-big-data-monster.  Its author, Cathy O’Neil, has a Ph.D. in mathematics from Harvard but left academia for the, supposedly, much more lucrative career in the financial industry.  Her timing was less than perfect and WMD chronicles her “odyssey from math-loving nerd clutching a Rubik’s Cube to Occupy Wall Streeter pushing for banking reform; along the way, she learns how algorithms—models used by governments, schools, and companies to find patterns in data—can produce nasty, or at least unintended, consequences.”  The book will be released in hardcover on September 6th.

(29 August 2016): “Odd Lots: How Watching Seinfeld Can Teach You About Economics” (http://www.bloomberg.com/news/articles/2016-08-29/odd-lots-how-watching-seinfeld-can-teach-you-about-economics)

********This edition of Odd Lots by Bloomberg editors Joe Weisenthal and Tracy Alloway provides a 22-minute interview with economist Alan Grant, who is responsible for website “The Economics of Seinfeld” (http://yadayadayadaecon.com/).  Grant has gone through all nine seasons of “Seinfeld” and pulled out video clips illustrating a wide array of economic concepts.  As the website notes, “It is the simplicity of Seinfeld that makes it so appropriate for use in economics courses.”  I confess that I was not a follower of Seinfeld but I viewed a few of the roughly 100 clips on the website and found them entertaining and appropriate illustrations of economic concepts.  In addition, they provide students with a sense of the broader issues often assumed away in the relatively spare models that economists typically teach.  In addition to “Seinfeld,” Grant mentions “The Wire” as a good example of a TV series that lends itself to economics instruction, e.g., the price elasticity of demand.

********In the spirit of economics in TV shows, this week’s copy of The Economist has a bit more to say, at least indirectly.  In “Schumpeter: Mafia management” (http://www.economist.com/news/business/21705858-crime-families-naples-are-remarkably-good-business-mafia-management) has a bit to say about the Italian show “Gomorrah” that just began showing on Sundance TV.  The series is “a drama of Italian gangs known as the Camorra that runs a criminal empire from their base in Naples.”  Evidently the program is “far darker” than the much-watched series “The Sopranos,” “The Wire,” and “Breaking Bad.”  Still, the program “has been Italy’s most talked-about-television series since its release two years ago.”  I thought the article made an excellent point when it indicated that where it is difficult to do legal business, illegal business will thrive.  This seems like a testable hypothesis.  The article mentions the World Bank’s ease-of-doing-business table (http://www.doingbusiness.org/rankings), which would seem to be an important element in such a national study.  Of course, the invisible foot varies greatly from country to country.  Consequently, it might be easier to test the relationship between business ease and illegal activity using states (in the U.S.) or comparable geographical units for other countries.  Is there a credible ranking for each state of the U.S. on the ease-of-doing business?

********What role does trust play in doing legal and illegal business?  That is hard to say, but clearly trust is one of those “lubricants” that make transactions take place more easily.  The issue of trust is dealt with this week in The Economist in “Free exchange: Believing is seeing” (http://www.economist.com/news/finance-and-economics/21705831-new-technologies-will-make-society-richer-cultivating-trust-believing-seeing).  For additional information, in which the article is embedded, take a look at the Free Exchange blog: http://www.economist.com/blogs/freeexchange/2016/08/bot-we-trust.

********By the way, economist Kenneth S. Rogoff thinks that one of the factors supporting illegal activity is the $100 bill and that it is time to get rid of it, then the $50 and $20 bills.  As he writes in “The Sinister Side of Cash” [SR](http://www.wsj.com/articles/the-sinister-side-of-cash-1472137692), “There is little debate among law-enforcement agencies that paper currency, especially larger notes such as the U.S. $100 bill, facilitates crime: racketeering, extortion, money laundering, drug and human trafficking, the corruption of public officials, not to mention terrorism.  There are substitutes for cash—cryptocurrencies, uncut diamonds, gold coins, prepaid cards—but for many kinds of criminal transactions, cash is still king.  It delivers absolute anonymity, portability, liquidity and near-universal acceptance.”  You can learn more about his book The Curse of Cash at: https://www.amazon.com/Curse-Cash-Kenneth-S-Rogoff/dp/0691172137/.  Rogoff is on the faculty of Harvard University and was formerly the chief economist at the International Monetary Fund.

(29 August 2016): “Which State Is a Big Renewable Energy Pioneer?  Texas” [SR](http://www.wsj.com/articles/which-state-is-a-big-renewable-energy-pioneer-texas-1472414098)

——–Traditionally strong in oil and gas, Texas is adding renewables to its energy portfolio.  The state “has added more wind-based generating capacity than any other state, with wind turbines accounting for 16% of electrical generating capacity as of April.  Now Texas is anticipating a huge surge in solar power.  At a time when debate is raging between political parties over climate change, and critics charge that ‘green energy’ is little more than a government creation, Texas has taken an approach that works within the state’s free-market-based electricity system.”  The present situation dates back “to 1999, when then-Gov. George W. Bush and a Republican-dominated legislature overhauled the Texas power market.  The free market-oriented deregulation broke the grip of most monopoly utilities that controlled generation, transmission and retail sales of electricity and introduced competitive auctions for wholesale power.”

********Texas is well-suited for electricity generated by both wind and solar.  No doubt the use of these resources was hastened by deregulation, although it surely also enabled the Enron scandal (https://en.wikipedia.org/wiki/Enron_scandal), which was “revealed in October 2001.”  Andrew Fastow was involved in the Enron debacle and he figures prominently in a forthcoming book by Eugene Soltes, Why They Do It: Inside the Mind of the White-Collar Criminal.  You can learn more about the book and “why they do it” at: http://www.bloomberg.com/news/articles/2016-08-29/why-they-did-it-madoff-and-enron-s-fastow-explain-the-biggest-frauds-in-u-s-history.

********The electricity market is, of course, undergoing massive transformation, with more on the way.  The further development of electrical storage by batteries is part of that transformation, and it is explored in “Energy storage is taking on a greater role in the power grid.  But how big can it get?” (http://www.latimes.com/business/la-fi-energy-storage-future-20160829-snap-story.html).  Better batteries will, among other things, enable electric cars to assume a larger share of the auto market.  This is developed at some length in the column by Christopher Mims, “Why Electric Cars Will Be Here Sooner Than You Think” (http://www.latimes.com/business/la-fi-energy-storage-future-20160829-snap-story.html).  I thought Mims made a valuable point when he said that mass adoption of “electric vehicles is coming, and much sooner than most people realize.  In part, this is because electric cars are gadgets, and technological change in gadgets is rapid.”  This article seems to have struck a nerve, at least it got people writing, as it had more than 900 comments on the first day of its publication.

(29 August 2016): “FAA Forecast: 600,000 Commercial Drones Within the Year” (http://www.nytimes.com/aponline/2016/08/29/us/politics/ap-us-drone-rules.html)

——–According to an estimate of the Federal Aviation Administration, there “will be 600,000 commercial drone aircraft operating in the U.S. within the year as the result of new safety rules that opened the skies to them on Monday.”  In addition to a variety of rules for operating the unmanned aircraft, “Drone operators must also pass a test of their aeronautical knowledge administered by the FAA.”  More than 3,000 people “had registered with the FAA to take the test as of Monday.”

********The University of North Dakota offers a B.S. in Aeronautics with a Major in Unmanned Aircraft Systems Operations (http://aviation.und.edu/prospective-students/undergraduate/uas-operations.aspx).  Presumably the FAA’s new rule will further increase the demand for the degree.  You can learn more about the new drone rules at: https://www.faa.gov/news/updates/?newsId=86305.

(31 August 2016): “Employers Find ‘Soft Skills’ Like Critical Thinking in Short Supply” (http://www.wsj.com/articles/employers-find-soft-skills-like-critical-thinking-in-short-supply-1472549400)

——–“The job market’s most sought-after skills can be tough to spot on a résumé.  Companies across the U.S. say it is becoming increasingly difficult to find applicants who can communicate clearly, take initiative, problem-solve and get along with co-workers.  Those traits, often called soft skills, can make the difference between a standout employee and one who just gets by.”  These skills are especially important now that “Companies have automated or outsourced many routine tasks, and the jobs that remain often require workers to take on broader responsibilities that demand critical thinking, empathy or other abilities that computers can’t easily simulate.”

********I was especially struck by this paragraph in the article:

In a Wall Street Journal survey of nearly 900 executives last year, 92% said soft skills are equally important or more important than technical skills.  But 89% said they have a very or somewhat difficult time finding people with the requisite attributes.  Many say it’s a problem spanning age groups and experience levels.

How, then, can these “soft skills” be spotted on the résumé?  I doubt that there is an easy answer.  More than likely, these become evident only through face-to-face interaction over time, rather than through some sort of document, e.g., a test or curriculum vitae.  Perhaps that is why personal interviews play such an important role in hiring processes.  I can’t help but think that the distinction between tacit and explicit knowledge is relevant to the discussion.  A thorough, though challenging, discussion of the discussion is presented in Tacit and Explicit Knowledge (https://www.amazon.com/Tacit-Explicit-Knowledge-Harry-Collins/dp/022600421X/), by sociologist Harry Collins.

May you have a good week!

Bruce

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