Welcome to week 323! 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 let me know if you have questions or comments.
(18 June 2018): “ A History of the Energy We Have Consumed” The New York Times
——–Review of Energy: A Human History, by Richard Rhodes. “Whether he is explaining what is meant by the octane rating of fuel or the way Volta’s pile—the first battery—worked, Rhodes makes dry and often technical subjects not just digestible, but a pleasure to consume. . . He explains that his motivation for writing this book was to provide a larger context for our contemporary debates about energy and ‘to cast light on the choices we’re confronting today because of the challenge of global climate change.’ In many ways, Rhodes achieves his purpose. . . . the dedicated reader can discern important themes emerging over time that have obvious applicability to our current moment.”
********Energy appears to tell a story that is highly consistent with the invisible forces, as well as providing insight into the sources of invention and the obstacles that must be circumvented. In reading the review, I was reminded of Daniel Yergin’s book The Quest: Energy, Security and the Remaking of the Modern World and wondered how the two books relate. My search of Rhodes’s book failed to find a reference to The Quest, although there were references to Yergin’s Pulitzer Prize-winning book The Prize. My sense is, having scanned the Tables of Contents of both books, that Energy is written closer to scale and decisions of individual human actors than The Quest. As such, the two books are more likely to be complements than substitutes.
(21 June 2018): “These places will pay U.S. workers thousands of dollars to move there” The Washington Post
——–States and municipalities facing worker shortages are turning to signing bonuses to address the problem. Megan McGown, of Nebraska’s North Platte Area Chamber of Commerce and Development Corporation, says the town of 24,000 has about 500 open jobs and matching bonuses are a way of filling those positions, noting that “People don’t want to see companies move away because they can’t find workers.” To date, “two people have received the bonuses—both for a total of $10,000: a lawyer and a physical therapist.”
********McGown’s statement is a clear reminder that businesses, as well as workers, can move to address labor shortages. Business moves will affect the demand for labor, while worker moves will affect the supply of labor. It is so easy to lose sight of demand and supply adjustments to market conditions.
(21 June 2018): “The New Startup South” Bloomberg Businessweek
——–Greenville, South Carolina has provided a particular answer to the question, “How do you revive postindustrial towns and make them part of the knowledge economy?” There, “decades of political commitment to creating a community that’s appealing to college graduates and high-skilled workers” have played a role in its transition, as has “access to technology and research talent from nearby Clemson University and state-of-the-art manufacturing plants turning out Michelin tires and BMWs.” Also playing a role is a culture of risk-taking and a network of investors to fund the early stages of businesses.
********Raleigh, North Carolina compared favorably to Greenville in relation to the number of new businesses per 1,000 people. On the other hand, Danville, Virginia did not. Danville is following “the Greenville playbook closely” hoping to move its median income of $33,721 toward Greenville’s $51,595. Looking at the article immediately above, how likely is it that a business will move from Greenville to Danville to pursue lower wages? How likely is it that some workers will move from Danville to Greenville to pursue higher wages?
(21 June 2018): “Michel Foucault’s lessons for business” The Economist
——–“Not many businesspeople study post-war French philosophy, but they could certainly learn from it. Michel Foucault, who died in 1984, argued that how you structure information is a source of power. A few of America’s most celebrated bosses, including Jeff Bezos and Warren Buffett, understand this implicitly, adroitly manipulating how outsiders see their firms. It is one of the most important but least understood skills in business. . . . Most industries have established taxonomies that hide their flaws. . . . A few astute bosses know how to remould taxonomies, bending the perceptions of investors, counterparties and staff.”
********This one-page article provides examples of changes in the categories by which businesses represent themselves have made them more attractive in the eyes of investors. Of course, investors are simply one group of people whose perceptions one might wish to influence, and businesses are simply one organization that might wish to influence perceptions. Each set of categories, I am sure, brings some things into focus, while letting others recede into the background. In an economic approach to category change, then, categories will be chosen to best advance the interests of the relevant party.
(21 June 2018): “For a day, I was one of the millions of Americans without a bank account. It was humbling” The Los Angeles Times
——–LA Times finance reporter James Rufus Koren recently teamed up with “Ray Chay, director of operations at a high-interest consumer lending company, and Sybil Mulokwa, a manager at a company that develops software for small banks and credit unions” to get a sense of what it is like to use the financial services of the poor. The occasion was “an annual conference organized by the Center for Financial Services Innovation and attended by executives from banks, credit unions and financial technology firms, as well as consumer advocates and even federal regulators.” Their team, like others participating in the Financial Experience (FinX), was assigned an “L.A. neighborhood and asked to complete several transactions including cashing a few checks, getting a debit card, asking about a loan and buying a small gift. There was an extra catch: It all had to be done in about two hours, a time limit many of us thought was generous given our own experiences with financial products. . . . In the end we got through only about half our tasks and still blew past our deadline. Even if we’d had more time, we wouldn’t have had enough cash to finish.” Both Chay and Mulokwa commented about the roles of money and time. Chay noted: “the biggest lesson was that his customers—who are typically in some kind of financial bind—may be just as pressed for time as they are for cash.” Mulokwa noted that “she has a new appreciation for the ‘time tax’ of all these services, but her biggest takeaway from FinX is that she doesn’t know enough about how underbanked consumers live their lives.”
******** The time required to access financial services, if one can access them at all, is something I haven’t thought about at all. But time constraints are just as relevant as money constraints, and just as a poor person typically pays more money for a given financial service than someone who is not, so a poor person typically expends more time for that same service than someone who is not. You can learn more about CFSI at its website.
********Barbara Ehrenreich’s book Nickel and Dimed: On (Not) Getting By in America has been sitting on my book shelves for years. It is time to read it.
(22 June 2018): “Companies Get First Tariff waivers, but Many More Are Left in Limbo” The New York Times
——–“The Trump administration granted seven companies the first set of exclusions from its metal tariffs this week and rejected requests from 11 other companies, as the Commerce Department began slowly responding to the 20,000 applications that companies have filed for individual products. . . . While the administration has said the exclusions are an effective way to ensure the fairness of the tariffs, companies that have applied for the exclusions criticized the exercise as both long and disorganized.”
********This article provides a glimpse of how the newly-imposed tariffs on metals actually work, which includes an appeal process for particular buyers to obtain relief from the tariff. In effect, the process replaces the relatively impersonal workings of the market with the relatively personal workings of a bureaucracy. While reading the article, the expression “a nation of laws, not of men” came to mind, which is one statement of the so-called “rule of law.” In 1780, “John Adams enshrined this principle in the Massachusetts Constitution by seeking to establish ‘a government of laws and not of men.’”
********There are two recent (and lengthy) books by highly-respected publishers that take broad overviews of trade policy in the United States. First, the 2017 Clashing Over Commerce: A History of US Trade Policy, by Douglas A. Irwin. Irwin is an economist at Dartmouth College. One of the Amazon reviewers noted that “Irwin divides his history into three eras: tariffs for revenue (1789-1860), tariffs for restriction (1861- 1933) and tariffs for reciprocity (1934-Present?).” Second, the 2018 The Wealth of a Nation: A History of Trade Politics in America, by C. Donald Johnston. Johnson has had a varied career in politics, administration, and academia. He is “Director Emeritus of the Dean Rusk International Law Center at the University of Georgia School of Law, where he was on the faculty for eleven years and taught international trade law in China and Geneva.”
********Every tariff has its consequences, some intended and some unintended. Some unintended consequences are adverse and some beneficial (although one doesn’t hear much about the latter). The article “Lobsters, Small-Batch Whiskey and Trump’s Trade War” The New York Times provides vignettes of some of the consequences of recent tariffs, both by the U.S. and elsewhere, on the following products: nails, whiskey, lobsters, cranberries, and peanut butter. Regarding cranberries, which are subject to a newly-imposed European Union tariff, it is noted: “From a political perspective, it makes sense to pick on those crops that would have the most significance politically . . . The speaker of the house happens to live in Wisconsin” where cranberries are an important crop. Yet another business based in Wisconsin is Harley-Davidson. The article “Harley-Davidson Moves Some Production Out of U.S. After Tariffs” is highly ironic. A firm can’t move cranberry bogs out of its home country, but motorcycle production can be so moved.
(22 June 2018): “There’s little economic justification for tipping. But we can’t stop doing it.” The Los Angeles Times
********This is a review of some of the well-known arguments for and against tipping. What caught my attention is academic expert on the subject, Michael Lynn, “a business professor at Cornell University who probably has studied tipping more than any other American academic.” You can learn about his work at his website. The biggest obstacle to be overcome in moving away from tipping is the so-called ‘tip credit’ of federal law, that allows “businesses to pay tipped workers as little as $2.13 an hour.” (A map of the U.S. showing the Minimum Wages for Tipped Employees can be found here.) Without the tip credit, restaurants would have to pay their currently tipped workers substantially more than is presently the case, which goes a long way toward explaining why the National Restaurant Association “generally opposes any move to raise minimum wages.” Restaurants in San Francisco are dealing with high wage rates for wait staff by increasing the amount of labor that customers put into their dining experience. You can learn more about this approach in “San Francisco Restaurants Can’t Afford Waiters. So They’re Putting Diners to Work.” The concept, according to the article, is spreading.
May you have a good week! Bruce