294 (7 December 2016)

Welcome to week 294!  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.


(18 November 2016): “Jay W. Forrester Dies at 98; a Pioneer in Computer Models” (http://www.nytimes.com/2016/11/18/technology/jay-forrester-dead.html)

——–“Jay W. Forrester, an electrical engineer whose insights into both computing and organizations more than 60 years ago gave rise to a field of computer modeling that examines the behavior of things as specific as a corporation and as broad as global growth, died on Wednesday [November 16] at his home in Concord., Mass.  He was 98.”  Professor Forrester “was working at the Massachusetts Institute of Technology in the 1950s when he developed the field of system dynamics modeling to help corporations understand the long-term impact of management policies.  System dynamics, he once wrote, ‘uses computer simulation to take the knowledge we already have about details in the world around us and to show why our social and physical systems behave the way they do.’  It is now included in many business school curriculums, and simulation modeling has been adopted by other disciplines.”

********Forrester was truly an intellectual giant and a long-lived one.  He reminds me in some ways of Nobel laureate Ronald Coase who made a career based upon insights he drew from actually talking with the people involved in the nitty gritty of manufacturing.  Alfred Marshall did much the same, albeit at a different (much later) stage of his career, when his Industry and Trade (1919) was published.  I first came to learn about Forrester in the early 1970s when I took a course on Economic Dynamics from Richard Day at the University of Wisconsin-Madison.  It was my last semester as an undergraduate and Professor Day drew heavily upon The Limits to Growth: A Report for the Club of Rome’s Project on the Predicament of Mankind (1972), which drew heavily from Forrester’s World Dynamics (1971).  The book, authored by Donella H. Meadows, Dennis L. Meadows, Jørgen Sanders, and William W. Behrens, III, resulted in a large outpouring critical of its “growth and collapse” simulations, and our class spent some time exploring them.  Much will be written about the contributions of Jay W. Forrester in the years to come.  You can learn more about system dynamics at: https://en.wikipedia.org/wiki/System_dynamics.  A classic, and readable, statement of Forrester’s approach is presented in his 1971 article “Counterintuitive Behavior of Social Systems” (https://ocw.mit.edu/courses/sloan-school-of-management/15-988-system-dynamics-self-study-fall-1998-spring-1999/readings/behavior.pdf).

(29 November 2016): “Welcome to Capitalism Camp for Kindergartners” (https://www.bloomberg.com/news/features/2016-11-29/welcome-to-capitalism-camp-for-kindergartners)

——–Chuchi Arevalo is a “Georgetown MBA and former business consultant” and the founder of Spark Business Academy, which provides offers classes such as the “flagship Future Millionaires Bootcamp, a weeklong, $495 course in budgets, investing, entrepreneurship, business ethics, and leadership.”  He offers his courses in Washington, D.C. and its suburbs, where “it’s like the Great Recession never happened.  Almost a quarter of D.C. households now earn more than $150,000 a year, compared with 8 percent in 2000.  Five of the 10 wealthiest U.S. counties are D.C. suburbs; the city is chockablock with lawyers, government contractors, and consultants. . . . Area schools are notorious pressure cookers, as high-achieving parents push their children to begin their own ascent.”  At Spark, children 6-10 and 11-16 are given the opportunity to learn concepts such as the price elasticity of demand and explore IRS Form 1040.  “On the last day of camp, Arevalo brought doughnuts and pizza and led one last debate, about the ethics of Mylan’s decision to raise prices sixfold on its lifesaving EpiPen.  Or, as he put it in a note to parents, ‘Campers practices stakeholder management by seeking to strike a balance between the company’s duty to increase shareholder value (and profits) and its duty to its customers.’”

********The article reminds me a lot of the A-Hed pieces of The Wall Street Journal.  Although its title does seem to exaggerate the clientele of the camp, reading the article was eye opening.  I have mixed thoughts and emotions about this development, but I thought it was interesting enough as, perhaps, an instance of the invisible handshake—social an historical forces that influence human behavior.

********This article reminded me of one I recently read in The Chronicle of Higher Education: “What Was Conservatism?”  Its author is Jennifer Burns, who is an associate professor of history at Stanford University.  What made the connection was her prior authorship—I haven’t read it—of Goddess of the Market: Ayn Rand and the American Right (https://www.amazon.com/Goddess-Market-Rand-American-Right/dp/0195324870/).  I read a bit of the “Essay on Sources” in the back of the book and if Burns is to be believed, and I am willing to believe, many (most?) treatments of Rand’s left have been based on edited, and in some cases rewritten, texts rather than her actual words.  Learning more about Ayn Rand will likely be valuable as her ideas, or approximations thereof, begin to have more influence in federal politics during the next four years.

(2 December 2016): “Boycotts.  Backlash.  Breitbart: U.S. companies confront a volatile political climate” (http://wpo.st/E9FJ2)

——–“Froot Loops and Frosted Flakes aren’t normally the kind of brands to get caught in the political crosshairs.”  But when “Kellogg said this week it would pull advertising from Breitbart News, the far-right web site that its critics say trades in racist and sexist content.  In response, Breitbart called on readers to boycott the company, devoted a chunk of its front page to stories about Kellogg or the boycott, and sparked a social media outcry.  Consumers on both the right and the left piled in, saying they would either stop buying the company’s products—or conversely, stock up on them. . . . In the weeks since the election, companies have navigated a sharply politicized environment, one that has entailed calls for boycotts, explosive social media responses to executive comments and thorny interactions between front-line workers and their customers”

********Although the occasion of the article is the pulling of Kellogg’s advertising from Breitbart, what struck me was the opportunity that a media company has for affecting demand, in this case the demand for the Kellogg products if not the demand for advertising on Breitbart’s site.  This reminds me of the expression, usually attributed to Gandhi, “An eye for an eye makes the whole world blind.”  Not surprisingly, the source of the expression is more complex and interesting (http://quoteinvestigator.com/2010/12/27/eye-for-eye-blind/).  The Kellogg case indicates the importance of reputation management as well as the necessity for careful investigation of the advertising spots.  If a company simply seeks to “follow the eyeballs,” its products might well end up at places contrary to the values it espouses.  You can learn more about how about eyeball-following ad placement at: http://www.wsj.com/articles/breitbart-controversy-spotlights-ad-technology-confusion-1480737178.

(3 December 2016): “Too Many Railcars, Too Little Freight” [SR](http://www.wsj.com/articles/too-many-railcars-too-little-freight-1480690819)

——–“Light traffic on North American railroads has sidetracked the railcar market.  Railcar manufacturers, financiers and equipment-leasing companies feasted on high demand to move coal, oil and other commodities from 2012 until last year.  Then commodity prices crashed and output slumped.”  As a result, “A fifth of the continent’s 1.6 million railcars are parked in storage yards or along lonesome stretches of rural track.  A quarter fewer new cars were delivered in the first nine months of 2016 compared with a year earlier.  Lease rates for some cars have fallen by more than half.”  And the length of leases has fallen: “Railcar leases have shrunk to as short as a year from six to eight years a couple of years ago, railcar-market analysts said.  Owners are willing to lease out cars for less time at lower rates to make whatever money they can.”

********As the article comments, “Like other [durable] equipment markets, the railcar business is susceptible to booms and busts.”  One thing I noticed was that there was no mention of employing salvage operations for “redundant” railcars.  Cutting up ships and selling what remains is frequently practiced.  Does this not happen for railcars or was it something not mentioned by the reporter?  My quick look at the Internet revealed a meaningful number of railcar salvage yards.  It could be that there is no aggregate information about their activities.

(3 December 2016): “A History of Classical Music (The Women-Only Version” (http://www.nytimes.com/interactive/2016/12/02/arts/music/01womencomposers.html)

——–“This month at the Metropolitan Opera, audiences can see and hear, for the first time there in over a century, an opera composed by a woman—Kaija Saariaho’s ‘L’Amour de Loin.’  The milestone is shocking—and it can be explained, if not fully justified.  A composer with a desire for an audience has to be in possession of skills that have, on their surface, very little to do with music.  He (it was almost always a he) needs to be capable of self-promotion, of fund-raising, of a kind of confidence that makes others follow instructions.  Arguably, it’s these adjacent abilities that have been least encouraged in female composers.  Then there is the notion, intractable for centuries, that women could perhaps be talented of body—with nimble fingers and a bell-lie voice—but never of mind, which is, of course, where composition originates.”  American composer Ashley Fure, who has assembled and presented statistics on the participation of women in the various events and performances at the International Ferienkurse fur Neue Musik at Darmstadt, Germany in August 2016, notes that in music, like success in architecture and high cuisine, “Talent isn’t enough.”  There is “A vast an complicated matrix of financing, promotion and patronage” that presents ‘many opportunities for the pressures and incongruities of culture to impact the dissemination an development of work.’”

********This is one of the clearer examples of the role of social and historical forces, i.e., the invisible handshake, in affecting human behavior.  The article largely proceeds by examining a sampling of women composers, accompanied by recordings of one of their works.  I listened to them all and the piece by Barbara Strozzi (1650s) stood out for me, as did the one by Louise Farrenc (1850).  “The March of Women,” by Ethel Smyth (1912) is especially relevant to the article.  Finally, Ashley Fure’s “Something to Hunt” provides some exposure to New Music.  You can learn more about Fure’s work, women in music, and the International Ferienkurse by following suggestive links at: https://soundcloud.com/gender-research-darmstadt.  One of the things you could ultimately find is the almost two-hour panel organized by Fure at Darmstadt (https://soundcloud.com/gender-research-darmstadt).

********So, yes, culture does matter and can limit, as well as enable.  With regard to the latter, there is review of economic historian Joel Mokyr’s new book A Culture of Growth: The Origins of the Modern Economy (http://www.economist.com/news/books-and-arts/21711023-new-history-puts-principle-contestability-heart-story).  In developing the importance of culture in relation to the divergent growth of Western societies, “Mr Mokyr speaks of ‘a market for ideas’, a system in which people ‘try to persuade an audience of the correctness of their beliefs’.”  In Europe, it is argued, “an arrangement whereby the ‘market for ideas’ flourished.”  The source of that flourishing was “The Royal Society, a club for scientific exchange founded in London in 1660, [that] started a journal in which everyone from Christopher Wren to Robert Boyle battled over ideas. . . . A translational community known as the ‘Republic of Letters’ sprang up.”  You can learn more about Mokyr’s book at: https://www.amazon.com/dp/0691168881.

********One more variation on the culture theme is provided by “An Incubator for (Former) Drug Dealers” (https://www.bloomberg.com/news/features/2016-11-29/an-incubator-for-former-drug-dealers).  As former prison inmate Bashuan Brown notes, those who hustle drugs “are entrepreneurs denied opportunity.”

(4 December 2016): “From Michael Lewis, a Portrait of the Men Who Shaped ‘Moneyball’” (http://www.nytimes.com/2016/12/03/business/media/from-michael-lewis-a-portrait-of-the-men-who-shaped-moneyball.html)

********The latest book of prolific author Michael Lewis, The Undoing Project: A Friendship That Changed Our Minds (https://www.amazon.com/Undoing-Project-Friendship-Changed-Minds/dp/0393254593/) will be released on December 6th.  In it he relates the collaboration and friendship of two psychologists who made lasting contributions to economics: Daniel Kahneman and Amos Tversky; Kahneman received the Nobel prize in economics in 2002 (http://www.nobelprize.org/nobel_prizes/economic-sciences/laureates/2002/).  The book was reviewed earlier at: http://www.nytimes.com/2016/12/01/books/review-michael-lewis-on-two-well-matched-but-finally-mismatched-men.html.  This book adds to the growing library of biographically-oriented books by those who have contributed to the emergence and growth of behavioral economics.  One book that comes immediately to mind is Misbehaving: The Making of Behavioral Economics (https://www.amazon.com/Misbehaving-Behavioral-Economics-Richard-Thaler/dp/039335279X/), by Richard H. Thaler.

(7 December 2016): “Forget Robots—People Skills Are the Future of American Jobs” (https://www.bloomberg.com/news/articles/2016-12-07/forget-robots-jobs-requiring-people-skills-are-the-future-of-american-labor)

——–“Automation may be gutting American manufacturing jobs, but there’s one thing the robots still can’t beat us at: people skills.  It just so happens that the future of American labor will require a lot of them.  The occupations projected to a the most jobs in the next 10 years, according to the Bureau of Labor Statistics—like home health aides, registered nurses, and retail and service workers.  Yet the jobs the president-elect has focused on reviving—mostly in manufacturing dominated by men—are the ones most vulnerable to being replaced by robots, not the ones that are in highest demand or expected to grow the fastest.”  So, it is thought that “The future of American labor lies in jobs that require empathy and critical thinking.”  Although jobs that require social skills are of growing importance, according to the National Bureau of Economic Research, many “empathy jobs pay a lot less than factory work.”  Historically, “Fields dominated by women tend to pay less.”  If more men enter empathy-requiring fields, pay me go up.  For now, “Those so-called feminized jobs . . . are the ones the robots . . . can’t take from us.”

********The article contains links to some valuable sources, including one to the NBER paper is “The Growing Importance of Social Skills in the Labor Force” (http://papers.nber.org/tmp/43408-w21473.pdf), by David J. Deming.  A statement by Ravin Jesuthasan, of the HR consulting firm Willis Towers Watson, struck me as a nice summary of current past and prospective job changes: “Anything that has a routine to it can be automated . . . Artificial intelligence is doing to white-collar jobs what robotics has long been doing to blue-collar jobs.”

May you have a good week!



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