318 (23 May 2018)

Welcome to week 318!  The articles below caught my attention this week.  What are intended to be relatively objective “briefs” are preceded by dashes (——–), whereas additional material or relatively subjective comments are preceded by asterisks (********).  Article titles preceded by [SR] require a subscription to be read in their entirety, although complete articles may be found by an Internet title search.

Please feel free to share this information with others.  If you have questions or comments, please send them my way.

(14 May 2018): “An Ice Core Reveals the Economic Health of the Roman EmpireThe New York Times

——–“A year by year economic history of the Roman Empire might seem as impossible to reconstruct as the lost 107 books of Livy’s history of Rome.  Yet something close to such a record has now been retrieved from the unlikeliest of places—a glacier in central Greenland.  The record is written not in Latin but in lead.  Lead emissions generated by mining operations in Northern Europe reached Greenland and were washed down in snowfall.  the snow accumulated, turned into ice, and preserved a record that stretches back thousands of years.”  Although ice cores have long been used to track climate change, using ice cores to measure lead emissions as a proxy for economic activity is relatively new.

********Fascinating article.  Ice core researcher Joseph R. McConnell was able to develop a method for melting ice cores that yielded “12 measurement per year throughout the Roman era.”  The graph of the resulting time series “show a fluctuating line whose peaks and troughs correspond to salient events in Roman history.”  Every fluctuation provides an opportunity to ask questions and explore.  Who knows what other clues to economic activity lie deep down in glacial ice cores?

(18 May 2018): Moving to a Place Instead of a JobBloomberg.com

——–“Among the bold souls moving to new metropolitan areas, the online rental marketplace
Apartment List this week identified two distinct types:

  • Job-first movers refer to renters who applied for jobs in multiple cities, then picked a city based on job offers.
  • Location-first movers refer to renters who chose a city to live in before applying for jobs in that city.”

Generally speaking, job-first movers had a larger percentage of bachelor’s degrees or higher than location-first movers, but location-first movers tend to be more likely to remain in the community to which they moved than job-first movers.  Location-firsters, so it seems, “sound like the kind of people you want to attract to your metro area.  They’re going to stick around, raise families and knit themselves into the fabric of the community, not leave town when the next good job opportunity opens up.”

********As the article goes on to note, the last paragraph tends to oversimplify things.  I did find the distinction between the two types of movers to be interesting and potentially useful.  Research by Michael J. Hicks and Dagney Faulk cited in the article sought to answer the question “Do people follow jobs, or do jobs follow people?”  They concluded that although things were different in the 1970s, today it is generally true that jobs follow people.  Thus “policies that focus on relocating capital investment, in order to move people to jobs, will be ineffective.”

********There is an interesting related article at Bloomberg.com, “Why Do American’s Stay When Their Town Has No Future?”  The short answer is social connection but the article is far richer than the short answer or its title suggests.  The article is principally about the disruptions caused by the imminent closing of a coal-fired power plant in Adams County, Ohio; Adams County is about 70 miles southeast of Cincinnati and boarders the Ohio River.  There are many familiar features of the closure but there are some unique ones, too.  What especially caught my attention was that statement that although coal-fired utilities get less media than coal mines, they are “far more widespread . . . and are experiencing a much more immediate decline.  Whereas coal mines have been shedding jobs for decades, coal-fired plants are experiencing their biggest crisis right now.”

********Sometimes people choose not to move to a new job due to social and historical forces—the invisible handshake—but other times there are legal and political reasons—the invisible foot.  Noncompete clauses in employee contracts limit mobility, as discussed in The EconomistLawmakers are trying to curb contracts that make it harder to change jobs.”  A precis of the pros and cons of noncompete clauses is given in the leader connected to the article, which comes out strongly against them except in narrowly defined circumstances.  California is one of only three states to make noncompete “clauses unenforceable except in special circumstances, such as the sale of a business.”

(18 May 2018):The French Perfume BoomJSTOR Daily

——–“Near the end of the nineteenth century, economist Thorstein Veblen came up with the idea of conspicuous consumption.  Coincidentally (or maybe not), around this time French perfumers mastered the art of selling an inexpensively-produced product as a symbol of decadent luxury.  In fact, historian Eugénie Briot points out the marketing of scents through clever branding, rather than real differences in what’s being sold, originated in nineteenth-century France.”

********As the article notes, the industrialization of perfume making first tended to lower the cost of perfume, making it accessible to “the humble classes.”  To keep prices high, and to boost brand cachet, a variety of tactics were employed, “including displaying them [perfumes] in fancy boutiques and using elaborate packaging.  And in a move echoed today in ‘sponsored content’ stories on news sites, high-end perfumers also placed ads disguised as society gossip columns in which high-society ladies praised their products.”

(18 May 2018):Bags of Cash and Stealthy Deliveries: How Pot Start-Ups Pay TaxesThe New York Times

——–Although 30 states have legalized marijuana for “medicinal or recreational use,” the businesses involved in selling them “find themselves without access to banks to provide them with loans or checking accounts.”  This has resulted in a “cash economy” with people making “monthly and annual tax payments in hard currency instead of with checks or electronic transfers.”  For Charity Gates in Denver, Colorado, this involves “collecting stacks of $20 bills she has stored in various safes . . . She counts the cash and places it in small duffel or sling bags, carrying up to $20,000 at a time.”  She then drives to a building downtown, being sure to vary her routes to avoid being robbed.  Eventually she “walks into a room and hands her bags to a group of people waiting to run her money through counting and counterfeit-detection machines.  This is how she pays her taxes.”

********This seems to be an issue relating to federally chartered banks, as the article goes on to note that some “credit unions and small banks that are chartered by their state, not the federal government, have tried to fill the void by offering basic banking services to the cannabis industry.”  Clearly this as “opportunity for gain” that is just waiting for the right entrepreneur to make the right connections.  Perhaps artificial intelligence will provide a way to help realize those gains in the not-too-distant future.  The May 21st edition of Bloomberg Businessweek devotes about 30 pages to AI in a section titled “Sooner Than You Think.”

(18 May 2018):The World Is Heating Up, But Not Everyone Is Staying CoolBloomberg.com

********A relatively concise article examining the vicious circle involving energy use, climate change, and air conditioning.  The inset text is from the article.

Climate change is raising atmospheric temperatures, directly increasing the need for cooling, which is resulting in more burning of fossil fuels in power stations to meet the increased electricity load, which is contributing, in turn, to more climate change. Breaking this circle ultimately hinges on arresting climate change; that will require curbing the amount of energy used for cooling and for other end uses, as well as decarbonising the energy mix.

This is just the type of problem that system dynamics was developed to explore.

(20 May 2018):A Booming Economy With a Tragic PriceThe New York Times

——–“James Guy had been a dairy farmer since he was 15, and at 55, he thought he’d be preparing for retirement.  Instead he struggled to make the payments on a bank loan after the price of milk fell and never recovered.  One night in November 2016, his wife, Mary, who was working part-time as a nurse to help make ends meet, came home to find he had hanged himself.”  She said, “When a farmer is looking down the barrel of having to sell his farm or lose his farm or give up the profession he’d done all his life, it’s devastating . . . They just lose their identity.”  As a whole, “people living in remote Australia now take their own lives at twice the rate of those in the city.”  In remote areas of the state of Queensland, “the suicide rate for farmers was up to five times that of nonfarmers.”  But “the problem of rural suicides is not unique to Australia.  Countries as diverse as India and France also face problems of farmers killing themselves.”

********The article goes on to note that the causes of the suicide crisis of rural Australia vary.  “Some farming areas have been pummeled by drought, which many blame on global warming. . . . But economists and mental health experts say a common thread is the changes unleashed by a globalizing economy.”  The common threads of climate change and globalization stand out, as does the fact that in rural Australia, at least, “the majority of farmers are men, who are expected to display an image of rugged individualism. . . . The problem is compounded by the difficulty of getting help.  With just a small number of mental health centers and trained professionals scattered across Australia’s vast rural areas, residents are only able to access mental health services at a fifth of the rate of city dwellers.”  All of this leaves me thinking about the rural areas in the U.S., one of which is where I live.

(22 May 2018):Coffee Waste Is Now Fetching a 480% Premium Over Coffee ItselfBloomburg.com

——–“Aida Batlle grows coffee on her family’s farm in the hills surrounding El Salvador’s Santa Ana Volcano.  Like generations before her, she had little use for the skin that encases the beans, so she’d turn it into cheap fertilizer or, more frequently, trash it.  then one day, walking past some husks drying in the sun, a smell hit her, a good smell: hibiscus and other floral aromas.  It dawned on her, she says, that some value might be extracted from what she had long considered refuse. . . More than a decade later, coffee husk—or, as it’s better known, cascara—is having a moment.”  Thanks to the demand of chains like Starbucks, Batlle “gets $7 for a pound of cascara, while the average price for coffee hovers around $1.20.”

********Stumptown Coffee Roasters has a nice post, with lovely illustrations, on cascara.  The production of cascara is still quite small, and the product is, as the French would say, dans le vent, i.e., fashionable.  Will that fashionableness remain if and when production ramps up?  Coffee retailers are asking themselves that question.  This is a nice example of the origin of an idea and the time necessary to realize it in the market.

May you have a good week!  Bruce

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