307 (8 March 2017)

Welcome to week 307!  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.

(2 March 2017): “Why Do We Have ‘Free Trade’ For Televisions, But Not For Corn?” (https://daily.jstor.org/why-do-we-have-free-trade-for-tvs-but-not-for-corn/)

********In this post, Livia Gershon summarizes an argument developed by Judith Goldstein in “The Impact of Ideas on Trade Policy: The Origins of U.S. Agricultural and Manufacturing Policies” in 1989.  Simply put, Goldstein’s argument is that the post-WWII economic boom “froze” the economic policies in place at that time, i.e., policy makers embracing a post hoc, ergo propter hoc argument (https://en.wikipedia.org/wiki/Post_hoc_ergo_propter_hoc).  The policies that were “frozen” were those that resulted from attempts to deal with the Great Depression and the Smoot-Hawley Tariff Act of 1930 (https://en.wikipedia.org/wiki/Smoot%E2%80%93Hawley_Tariff_Act), the latter of which “raised U.S. tariffs on over 20,000 imported goods.”  The National Recovery Administration adopted extensive government regulation in both the agricultural and industrial sectors.  However, the differential treatment of them resulted “not in the objective results of intervention in the two industries but in the way experts looked at the problem.  Agriculture, having been stressed even before the Depression, seemed more fundamentally in need of help.”  In short, this article provides a valuable look at how the policy ideas of experts have affected economic regulation.  Goldstein appears to develop these ideas more extensively, including over a longer time period, in her 1994 book Ideas, Interest, and American Trade Policy (https://www.amazon.com/Interests-American-Cornell-Studies-Political/dp/0801499887/).

********The mention of the views of experts reminded me of a recently published book: “Escape from Democracy: The Role of Experts and the Public in Economic Policy (https://www.amazon.com/Escape-Democracy-Experts-Public-Economic/dp/1316507130/), by David Levy and Sandra Peart.  I have not read the book but it does seem to provide a historically-based examination of the role of experts and the role of democracy in the development and execution of policy ideas.  Their arguments are surely worthy of consideration.

(3 March 2017): “How Uber Deceives the Authorities Worldwide” (https://www.nytimes.com/2017/03/03/technology/uber-greyball-program-evade-authorities.html)

********Uber has been in the news a lot of late and not in good ways.  Its so-called “Greyball” program is one of those ways.  According to the article, Greyball “uses data collected from the Uber app and other techniques to identify and circumvent officials who were trying to clamp down on the ride-hailing service.”  This use seems to have grown out of Uber’s development of a tool to monitor any “violation of terms of service.”  In the article an example of given of the attempt by an employee of Portland, Oregon to call an Uber ride in a “sting operation against the company.”  Evidently the Greyball program had identified this employee as a potential problem and “served up a fake version of the app.”  The result was that the sting failed.  This does seem to be, in some sense, akin to the use of radar detectors to evade speed traps.  But, as Wayne State University law professor Peter Hennings notes, “With any type of systematic thwarting of the law, you’re flirting with disaster . . . We all take our foot off the gas when we see the police car at the intersection up ahead, and there’s nothing wrong with that.  But [Uber’s use of Greyball] . . . goes far beyond avoiding a speed trap.”  This is simply the latest cat-and-mouse game between those who would entrap and those who do not wish to be trapped.

********While we are on the subject of taxi-like transportation, it turns out that taxi drivers will take advantage of the information asymmetry of its riders.  This is explored briefly in “Moral hazard: Taken for a ride” (http://www.economist.com/news/finance-and-economics/21717842-if-service-provider-knows-someone-else-paying-your-bills-he-more-likely).  As it turns out, “The most common form of overcharging was not, as might be expected, taking a longer route.”  Rather, the overcharging, since riders do care about time, was in the form of “bogus surcharges (a fee for airport pickup, for example), or charged the night-time fare in the daytime.”

(4 March 2017): “The Disturbing New Facts About American Capitalism” [SR](https://www.wsj.com/articles/the-disturbing-new-facts-about-american-capitalism-1488580706)

——–“New research by economists Gustavo Grullon of Rice University, Yelena Larkin of York University and Roni Michaely of Cornell University argues that U.S. companies are moving toward a winner-take-all system in which giants get stronger, not weaker, as they expand.”  This runs counter to the commonly expressed view that, in capitalism, “as companies get big, they become fat and happy, opening themselves up to lean and hungry competitors that can underprice and overtake them.”  According to the authors “The U.S. had more than 7,000 public companies 20 years ago . . . nowadays, it’s fewer than 4,000.”  Profitability of the largest companies has increased, too, as well as profit margins.

********The paper by the economists appears to be “Are US Industries Becoming More Concentrated” (https://papers.ssrn.com/sol3/papers.cfm?abstract_id=2612047), which was last revised on 26 February 2017.  The question is, of course, why has concentration increased?  According to the paper’s Abstract, the authors propose that “lax enforcement of antitrust regulations and increasing technological barriers to entry appear to be important factors behind this trend, resulting in weakened competition.”  Globalization might also be a part of the story;.  (Note: I haven’t read the paper.)  Perhaps businesses have had to get bigger to compete on a global scale.

********Jason Zweig, who wrote this piece, is the columnist for “Weekend Investor.”  In his column he notes how this information could have been used to guide investing in the stock market.  The strategy relies upon the number of firms in a given industry and the value of the eponymous Herfindahl-Hirschman Index (https://en.wikipedia.org/wiki/Herfindahl_index).

(8 March 2017): “Who’s to Blame for the Trucker Shortage?” [SR](https://www.wsj.com/articles/whos-to-blame-for-the-trucker-shortage-1488898803)

——–“In 2015, American Trucking Associations [ATA] estimated that for-hire trucking companies had nearly 50,000 fewer drivers than they needed.  The shortage was less severe in 2016, but the trade group expects it to worsen in coming years.  As policy makers wring their hands over the shortage, an Ivy League sociologist who spent time as a long-haul driver says the deficit is largely the industry’s own doing.”  Although the ATA “largely blames the grueling demands of a job that puts workers on the road for long periods[,]” sociologist Steve Viscelli, the author of The Big Rig: Trucking and the Decline of the American Dream, “says the shortage is the product of an industry labor model that relies heavily on inexperienced drivers and independent contractors.”  Owner-operators of big rigs “are attracted by promises of being their own bosses, but the arrangement often saddles them with unsustainable debt and high expenses.”  Wages for drivers have been rising in recent years and signing bonuses are being used, too.  “Such measures helped bring down industrywide turnover from nearly 100% in 2012 to just over 90% in 2014.  More recently, driver turnover has declined to around 80% due to less freight being shipped.”

********You can learn more about Viscelli’s book at: https://www.amazon.com/gp/product/0520278127/.  No doubt the Department of Transportation, under the leadership of Elaine Chao (https://en.wikipedia.org/wiki/Elaine_Chao), will play a role in the number of truckers and their quality of life.  The U.S. DOT website (https://www.transportation.gov/) provides information on the various transportation modes in the U.S.

********No doubt the regulation of U.S. transportation will be one area where a reconsideration of the scope and nature of regulation will be reconsidered in the Trump administration.  This week The Economist shared its thoughts on this subject, first in a leader, “Red tape in America: Doing regulation right” (http://www.economist.com/news/leaders/21717815-america-needs-regulatory-reform-not-crude-cull-environmental-rules-right-way-get-rid), and then in its companion article, “Regulation: Grudges and kludges” (http://www.economist.com/news/united-states/21717838-republicans-and-democrats-have-been-equally-culpable-adding-rulebook-too-much).

May you have a good week!

Bruce

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