300 (18 January 2017)

Welcome to week 300!  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.

(11 January 2017): “Will We Always Have the Poor Among Us?” (http://daily.jstor.org/will-we-always-have-the-poor-among-us/)

——–“Assurances to the contrary from Jesus . . . , we may be close to ending poverty as we know it.  That’s the good news shared recently by New York Times columnist Nicholas Kristof: simply put, the number of poor among us is declining rapidly.  According to the latest figures from the World Bank, in 2011 only 14 percent of the world’s population lived in ‘extreme’ poverty, down from 35 percent in 1993.  The improvement in conditions around the world has been steady enough that in late 2015 when UN member nations set themselves 17 new ‘Sustainable Development Goals,’ first on the list was to eradicate extreme poverty by 2030.  Similar good news has emerged from the Census Bureau about poverty levels in . . . the US.  If you think this sounds too good to be true, you’re not alone.  as Kristof reports, 95 percent of Americans today believe poverty is getting worse, a perception they share with the great majority of the developed world.”

********The general perception about poverty is perfectly consistent with the argument put forward in an article in The Washington Post (https://www.washingtonpost.com/posteverything/wp/2016/12/29/stop-saying-that-2016-was-the-worst-year/) noted in TIF Weekly 298, i.e., people tend to be unaware of long-term trends, focusing instead on recent events.  The article goes on to examine a variety of notions of ‘poverty’, drawing upon a 2005 article in the Journal of Epidemiology & Community Health.  In so doing attention is given to the “capabilities view” of human well-being developed by Amartya Sen and Martha Nussbaum.  The article provides references to an important publication of each author.

(13 January 2017): “Edmund Burke and the Birth of Traditional Conservatism” (http://daily.jstor.org/edmund-burke-and-the-birth-of-traditional-conservatism/)

——–“Edmund Burke (1729-1797) is the philosophical fountainhead of modern conservatism.  But he didn’t start out that way.  The Irish-born politician started as a fiery Whig, a voice for American independence and for Dissenters and radicals at home in Great Britain.  He stood against slavery and pros3ecuted the head of the British East India Company for corruption.  Then he met the French Revolution, and his views seemed to change abruptly. . . . But was it, indeed, the French Revolution that caused ‘an abrupt political tack from advocating parliamentary reform, religious toleration, and American liberty’?  Or was Burke’s critique of the French Revolution, as Burke himself sometimes argued, ‘first and foremost a parable for the English of his day’?  Historian McCalman argues that understanding Burke’s domestic experience is key to explaining his transformation.  According to McCalman, Burke’s radical transformation was greatly fanned, if not sparked, by the Gordon Riots of 1780.  Names after Lord George Gordon, the firebrand head of the Protestant Association (and onetime friend of Burke), this chaotic political uprising essentially scared the reformer out of Burke.”

********Burke’s Reflections on the Revolution in France (1790) is one of those essential books that I have yet to read, even though it is widely acknowledged to be the source of the intellectual thread of conservative thought.  What I find fascinating about the discussion of the Gordon Riots is that Burke evidently had much time—ten years—to reflect upon revolution-like events that affected him personally, so perhaps the French Revolution simply provided him with the opportunity to write out ideas that had long been developing.  Not so much, then, a momentary flash, but something sustained.  There is a link to the McCalman article, “Mad Lord George and Madame La Motte: Riot and Sexuality in the Genesis of Burke’s Reflections on the Revolution in France, at the bottom of the post.

(13 January 2017): “Working for an Algorithm Might Be an Improvement” (https://www.bloomberg.com/view/articles/2017-01-13/working-for-an-algorithm-might-be-an-improvement)

——–“Bridgewater, the world’s largest hedge fund, has been portrayed as a bizarre Moneyball-type machine in which employees’ every move is monitored and assessed, increasingly by computer algorithms.  Awful as that may sound, what if it’s actually a step toward a happier and more prosperous world?  Granted, descriptions of the place—including a recent Wall Street Journal article to which founder Ray Dalio has taken vociferous offense—make it seem pretty dystopian.  The firm, for example, amasses employee data to produce individual ‘Baseball Cards,’ with scores and ratings on dozens of attributes.  That’s great if the system turns you into a Honus Wagner card, but possibly demoralizing for anyone else.”  But Bridgewater isn’t the only company employing algorithms.  “Offices around the country are deploying tools to continuously monitor and assess employee activity.”  Such approaches are thought to stem from the work of Frederick Winslow Taylor, especially the 1911 Principles of Scientific Management (https://www.amazon.com/Principles-Scientific-Management-Frederick-Winslow/dp/0486299880/).  “Yet the theory’s namesake, Frederick Taylor, didn’t set out to maximize efficiency at the expense of employees’ sanity.  Rather he wanted to improve worker welfare.  The Progressive movement was in its early days, and social and political activists wanted to stop industrialists from exploiting the working class.  Taylor believed that his system for greater productivity would align the interests of employees and management.”

********The article indicated that the measured developed by Taylor, and as they are used by Bridgewater, are meant more to be used for employee coaching rather than employee winnowing.  Perhaps I should read the book.  Regardless, as the article indicates, the same measure that can be used to coach can also be used to winnow.  An overview of Taylor and his work can be found at: https://en.wikipedia.org/wiki/Frederick_Winslow_Taylor.

********Imbedded in the Bloomberg article is a link to another article in The Financial Times that has an informative and somewhat lengthy article “Gig Economy: When your boss is an algorithm” (https://www.ft.com/content/88fdc58e-754f-11e6-b60a-de4532d5ea35).  Within it there is a link to an nine-minute podcast “Return of ‘Taylorism’ on steroids” (http://podcast.ft.com/2016/09/08/return-of-taylorism-on-steroids/).

(15 January 2017): “A gynecologist secretly photographed patients.  What’s their pain worth?” (http://wpo.st/lyjR2)

********The article takes up the challenging problem of how to assign monetary awards to thousands of women who suffered psychological trauma associated with surreptitious photographs taken by a trusted gynecologist.

(15 January 2017): “Tax Refund Loans Are Revamped and Resurrected” (https://www.nytimes.com/2017/01/15/business/tax-refund-loans-are-revamped-and-resurrected.html)

——–Tax-refund loans are returning but this time with a difference.  Formerly such loans were issued by tax-preparation firms like H&R Block and its competitors with high interest rates and fees, but such loans became “nearly extinct after a regulatory crackdown that forced most major banks out of the market.”  But with the disappearance of such refund-anticipation loans (RALs), customers for tax-preparation services also disappeared.  So now, “The nation’s big tax-preparation companies are so desperate for customers that they are willing to put money up front—with absolutely no hidden fees or interest charges, and no ironclad guarantees that the companies will get paid back.”  As customers return, firms like Jackson Hewitt are treating the loans, with origination costs of $32-36, as “a marketing expense.”  Firms issuing such loans are looking to make up the costs of such loans by selling “add-on products” and the additional fees associated with them.

********It is interesting to see how the RAL has morphed in response to regulatory change and the subsequent reduction in customers.  In relation to this, I was struck by the statement of Greg Steinlicht of H&R Block, “This [offering of no-cost loans] is an effort to arrest our client loss, to bring more people to our office . . . The product went away for several years, but the client demand for it never did.”

(16 January  2017): “A Rare Corner of Finance Where Women Dominate” (https://www.nytimes.com/2017/01/16/business/dealbook/women-corporate-governance-shareholders.html)

——–“Women hold the top positions in corporate governance at many of the biggest mutual funds and pension funds—deciding which way to vote on the directors of a company board.  They make decisions on behalf of teachers, government workers, doctors and most people in the United States who have a 401(k).  The corporate governance heads at seven of the 10 largest institutional investors in stocks are now women, according to data compiled by The New York Times.  Those investors oversee $14 trillion in assets.”

********I didn’t see much in the way of explanation regarding the perceived dominance of women in corporate governance.  That being said, the article notes that “Corporate governance is playing a growing role within the broader ecosystem of corporate America.  Each spring, publicly traded companies hold shareholder meetings and outline business strategy for the coming year.”  It is further noted that the voting power on institutional investors “is rarely wielded to confront companies. . . . And their approach contrasts sharply with that of brash activist billionaires like William A. Ackman and Daniel S. Loeb, who have made a name for themselves as corporate agitators” who bring about change “by theatrically pounding on the front doors of companies and using the public court of opinion to bully companies into changing their strategies.”  Perhaps women tend to better able to navigate the diplomacy of corporate governance than men.

(17 January 2017): “As Pot Prices Plunge, Growers Scramble to Cut Their Costs” (https://www.bloomberg.com/news/articles/2017-01-17/as-pot-prices-plunge-growers-scramble-to-cut-production-costs)

——–“The increasing supply of legal marijuana is turning into a major buzz kill for growers as prices plunge—and an opportunity for companies that can help cut production costs.  Prices are tumbling as formerly illicit cultivators emerge from the shadows to invest millions of dollars in massive pot factories.  In Colorado, the average price sought by wholesalers has fallen 48 percent to about $1,300 a pound since legal sales to all adults started in January 2014, according to Cannabase, operator of the state’s largest market.  Supply is surging as growers expand and install the latest agricultural technology.”  According to John Chandler, a vice president at Urban-Gro of Lafayette, Colorado, a focus on efficiency “can cut production costs for some indoor growers to less than $300 a pound from more than $1,000.”  Some anticipate that the “regulated market in North America could triple to more than $20 billion in five years, from $6.7 billion last year . . . One caveat surrounding the booming cannabis industry is President-elect Donald Trump’s choice for attorney, Senator Jeff Sessions of Alabama, an ardent marijuana foe.  But it remains to be seen if Trump or the Republican-controlled Congress will attempt to challenge the states that have legalized the drug.”

********A nice example of the interaction of the invisible foot—legal and pollical forces—and the invisible hand—economic forces.  In some sense the market demand for legal marijuana has always been there.  What is different is that the market supply of legal marijuana has expanded as laws have changed in some states.  With increased supply and unchanged demand, market prices have fallen and reduced the profitability of firms.  This has put more urgency in the cost-cutting activities of firms, leading them to increase scale and modernize production.  As the article goes on to note, however, there is now increased legal risk from the incoming administration.  It will be interesting to see how this plays out.

May you have a good week!


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