311 (5 April 2017)

Welcome to week 311!  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.

Upcoming Sabbatical.  Please note that TIF Weekly will be on sabbatical for one year following the distribution of 312, which will complete its sixth year.  More details will be provided when 312 is distributed.  TIF Weekly 313 will be distributed on Wednesday, April 18th, 2018.

(29 March 2017): “Chase Had Ads on 400,000 Sites.  Then on Just 5,000.  Same Results.” (https://www.nytimes.com/2017/03/29/business/chase-ads-youtube-fake-news-offensive-videos.html)

——–“As of a few weeks ago, advertisements for JPMorgan Chase were appearing on about 400,000 websites a month. . . . Now, as more and more brands find their ads popping up next to toxic content like fake news sites or offensive YouTube videos, JPMorgan has limited its display ads to about 5,000 websites it has preapproved, said Kristin Lemkau, the bank’s chief marketing officer.  Surprisingly, the company is seeing little change in the cost of impressions or the visibility of its ads on the internet, she said. . . . The change illustrates the new skepticism with which major marketers are approaching online ad platforms and the automated technology placing their brands on millions of websites.”

********As the article notes, the practice of preapproving sites is known as “whitelisting.”  When one considers the care that businesses and other organizations give to nurturing their brand, it is hard to believe that JP Morgan Chase is just becoming aware of its importance.  The terms ‘whitelists’ and ‘blacklists’ are both in common use.  Blacklisting is the practice of disapproving sites.

(29 March 2017): “Elephants Get a Reprieve as Price of Ivory Falls” (https://www.nytimes.com/2017/03/29/world/africa/ivory-elephants-china.html)

——–“The price of ivory in China, the world’s biggest market for elephant tusks, has fallen sharply, which may spell a reprieve from the intense poaching of the past decade.  According to a report released on Wednesday by Save the Elephants, a respected wildlife group in Kenya, the price of ivory is less than half of what it was just three years ago, showing the demand is plummeting.  Tougher economic times, a sustained advocacy campaign and China’s apparent commitment to shutting down its domestic ivory trade this year were the drivers of the change, elephant experts said.”

********You can find the press release from Save The Elephants at: http://www.savetheelephants.org/about-ste/press-media/?detail=dramatic-changes-in-china-s-ivory-trade.  At that site it is possible to download a pdf of the 88-page report “Decline in the Legal Ivory Trade in China in Anticipation of a Ban,” by Lucy Vigne and Esmond Martin.  STE is based in Nairobi, Kenya.

(1 April 2017): “Free exchange: Will robots displace humans as motorized vehicles ousted horses?” (http://www.economist.com/news/business-and-finance/21719761-probably-not-humans-have-lot-learn-equine-experience-will-robots)

——–“In the early7 20the century the future seemed bright for horse employment.  Within 50 years cars and tractors made short work of equine livelihoods.  Some futurists see a cautionary tale for humanity in the fate of the horse: it was economically indispensable until it wasn’t.  The common retort to such concerns is that humans are far more cognitively adaptable than beasts of burden.  Yet as robots grow more nimble, humans look increasingly vulnerable.”

********This appeared as “Remember the mane” in the print edition of The Economist.  The article appears to be based upon “Robots and Jobs: Evidence from US Labor Markets,” by Daron Acemoglu and Pascual Restrepo.  A pdf of this lengthy mathematical paper can be downloaded at: http://www.nber.org/papers/w23285.  The abstract of the article notes: “According to our estimates, one more robot per thousand workers reduces the employment to population ratio by about 0.13-0.34 percentage points and wages by 0.25-0.5 percent.”

********If robots have something to say about the demand for human labor, so-called labor-saving devices do, too.  This second dimension shows up, albeit in a minor way, in the JSTOR Weekly post “How America Tried (And Failed) To Solve Its ‘Servant Problem’” (https://daily.jstor.org/how-america-tried-and-failed-to-solve-its-servant-problem/).  “In 1928, a group called the National Council on Household Employment brought together working servants, labor activists, efficiency experts, and even future First Lady Eleanor Roosevelt to try to solve the so-called ‘servant problem.’”  When it released its report, the concluded that “not only was domestic service undesirable because of its low pay and unlimited hours, but that the terms ‘servant’ and ‘maid’ alienated would-be domestics.”  The unwillingness of the employers of servants to pay more (or enhance the prestige of servant labor), as well as the expansion of non-servant employments led to the virtual elimination of servants as an employment category.  The article on which this post is based, “Experts and Servants: The National Council on Household Employment and the Decline of Domestic Service in the Twentieth Century,” is downloadable as a pdf.

(2 April 2017): “A Real Estate Boom, Powered by Pot” (https://www.nytimes.com/2017/04/01/business/a-real-estate-boom-powered-by-pot.html)

——–“Legalized marijuana has already upset societal norms, created a large legal gray area and generated a lucrative source of tax revenue.  Now it is upending the real estate market, too.  In the more than two dozen states that have moved to legalize pot, factories, warehouses and self-storage facilities are being repurposed for the cultivation and processing of potent marijuana plants and products.  Suburban strip malls and Beaux-Arts buildings have been reimagined as storefronts selling pre-rolled joints and edibles.  And because the marijuana business comes with added baggage, landlords and property owners are charging a premium for new tenants working in the cannabis business.”

********This article, in fact the paragraph above, shows all the invisible forces at work.  The shifting boundaries of marijuana law at the state level, take center stage; federal law regarding marijuana, but not its enforcement, has remained unchanged in recent years.  This has increased the demand for warehouse-type buildings suitable for growing marijuana.  Of particular interest is the role of uncertainty in marijuana operations.  Increased enforcement of federal law would diminish the retail and wholesale markets for marijuana, as well as property values.  Legalization of marijuana at the federal level would decrease the risk of participating in the industry and likely lead to an increase in supply and lower prices at retail and wholesale, reducing property values.  Then there is the interesting question of interstate commerce, mentioned in the article.  Moving marijuana across state lines is currently illegal, effectively creating as many (legal) markets for marijuana as there are states in which it is legal.  But a federal law legalizing marijuana and its movement across state lines would dramatically change where marijuana is grown, no doubt leading it to be cultivated where energy costs are low, although some brands will promote that their product is locally grown.  Is there another market where so much seems to be in play?

********I recently read The Economics of Prohibition (https://www.amazon.com/Economics-Prohibition-Mark-Thornton/dp/1610160479/), by Mark Thornton.  I was looking for a book that took a broad view of prohibitive activities, not just alcoholic prohibition, and the book provided an entry into the literature.  Thornton is a member of the Austrian school of economics (https://en.wikipedia.org/wiki/Mark_Thornton) and those ideas are reflected in the book.  What struck me as particularly valuable in the book was its emphasis on the existence of substitutes, sometimes many substitutes, for any given product.  What is true for a Toyota Corolla is also true for marijuana.  That being the case, the recent Guardian article “Big Pharma’s anti-marijuana stance aims to squash the competition, activists say” is very interesting.  The gist of the article is that marijuana is viewed by pharmaceutical companies as a substitute for some of their products.  It is no surprise, then, that Insys (http://www.insysrx.com/) is reported as having contributed $500,000 to (successfully) defeat a recent marijuana legalization effort in Arizona and not long afterward obtained FDA approval for its own “lab-made liquid form of tetrahydrocannabinol (THC).”  The product, Syndros (http://syndros.com/), is “approved for use in treating anorexia associated with weight loss in patients with AIDS, and nausea and vomiting associated with cancer chemotherapy in patients who have failed to respond adequately to conventional antiemetic treatments.”

********While we are on the subject of marijuana, here is a related piece on hemp and the N.C. Industrial Hemp Commission, the latter of which was create by the General Assembly in 2015.  The Commission is considering joining a suit against the DEA and its ruling that “products made with CBD or cannabidiol hemp, which are in the same cannabis family as marijuana, are illegal and cannot be transported across state lines.”  From what I gathered from the article, it is currently legal “to import [hemp] seed from Europe or Canada” but it is illegal to purchase hemp seed from another state.  It is easy to understand the frustrations of would-be and actual hemp producers of having to operate in such a legal environment.  The article includes an informative two-minute video with David Schmitt of Industrial Hemp Manufacturing that discusses how hemp is processed and its economic benefits for farmers.

(5 April 2017): “Minority Neighborhoods Pay Higher Car Insurance Premiums Than White Areas With the Same Risk” (https://www.propublica.org/article/minority-neighborhoods-higher-car-insurance-premiums-white-areas-same-risk)

********An interesting piece of investigative journalism by ProPublica.  The introductory material for the article notes: “Our analysis of premiums and payouts in California, Illinois, Texas and Missouri shows that some major insurers charge minority neighborhoods as much as 30 percent more than other areas with similar accident costs.”  The article is lengthy but you can get a clear picture of instances of disparate premiums from two graphical figures showing GEICO premiums in Illinois and Missouri.  A very attractive feature of the article is that it provides detailed information about how it did its study (https://www.propublica.org/article/minority-neighborhoods-higher-car-insurance-premiums-methodology).  Consequently, it should be (relatively) easy to use their work to study other states.

May you have a good week!

Bruce

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