Welcome to week 330! 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 might be found by an Internet title search.
Please let me know if you have questions or comments.
(8 August 2018): “Why ‘Fred’ Is the Best Friend of Economics Writers” The New York Times
********This article is an interview of sorts, by Neil Irwin, who is an economics writer for the NYT, with himself. It largely consists of a discussion of some of the tried-and-true tools that he uses as a reporter. He tends to use single-purpose devices rather than “Swiss Army Knives” and chooses to stay back from the technological frontier, preferring to let others to find tools that work well (and don’t). That is the first part of the article. The second part, which is what shows up in the title, is ’Fred’, which stands for Federal Reserve Economic Data, which is maintained by the Federal Reserve Bank of St. Louis. As he notes, Fred “allows you to use a single interface to pull, at last count, 509,000 different data series from 87 different sources of economic and financial data. A big part of the advantage is simply that once you’re familiar with the interface, which is intuitive, you don’t have to relearn the data retrieval tool for each statistical agency every time.” Irwin goes on to write, “I generally use Microsoft Excel for data analysis, which is powerful enough to do most of the stuff I know how to do on my own.” Otherwise, he brings in a colleague to deal with more sophisticated work.
(10 August 2018): “In Times of Trade War, Companies Get Creative to Avoid Tariffs” Bloomberg.com
——–“Facing the barrage of President Donald Trump’s tariffs, Steve Katz is ducking for cover in the trade-war version of a demilitarized zone. Katz manages a plant at United Chemi-Con in Lansing, North Carolina, a village of about 150 people . . . The facility . . . is covered by a foreign-trade zone based in Greensboro. Trade zones are areas in or near ports of entry under U.S. Customs and Border Protection supervision that are generally considered outside of CBP territory. With the blessing of the U.S. government, companies can import goods into the zone with reduced duties on a case-by-case basis. . . . To avoid U.S. tariffs on imported aluminum from Japan, Katz secured U.S. Customs approval to alter the activated area of the trade zone to include a shipping dock for exports. The company is also hoping to designate a new trade zone around its warehouse in California to avoid tariffs on Chinese imports sent outside the U.S.” Katz estimates that it cost the firm about $20,000 to alter the activated trade zone in North Carolina.
********As the article notes, this is a form of “tariff engineering” that is making a comeback as the U.S. moves away from the trade liberalization that has been underway almost continuously since the Reagan administration. A three-page note provides additional information about the history and methods of tariff engineering.
(11 August 2018): “De Tocqueville and the French exception” The Economist
********This is the second of six Philosophy Briefs on liberalism’s greatest thinkers. Tocqueville is almost universally known for Democracy in America (1835-40) but The Old Regime and the French Revolution (1856) is also essential for understanding this “most unusual member of the liberal pantheon”—a proud member of the French aristocracy. Tocqueville “believed that liberal optimism needs to be served with a side-order of pessimism. Far from being automatic, progress depends on wise government and sensible policy.” John Stuart Mill, in his Autobiography, “thanked Tocqueville for sharpening his insight that government by the majority might hinder idiosyncratic intellectuals.” Thus Mill’s notion of the “tyranny of the majority” seems to owe a good deal to Tocqueville.
(12 August 2018): “Business Book of the Year 2018—the longlist” The Financial Times
——–“The ups and downs of capitalism—past, present and future—are addressed by many of the books in contention for this year’s Financial Times and McKinsey Business Book of the Year Award. The 15 titles on the longlist for the £30,000 prize include the forthcoming Capitalism in America, a sweeping and entertaining history of US economics and business by Alan Greenspan, former chairman of the US Federal Reserve, and Adrian Wooldridge [of The Economist]. . . . The award, now in its 14th year, will go to the ‘most compelling and enjoyable’ business book from the list. Judges will select up to six finalists and announce the shortlist on September 14. . . . Last year’s prize went to Amy Goldstein for Janesville, her deeply reported book about the impact on a Wisconsin community after the closure of a General Motors assembly plant.”
********The article includes images and blurbs for each of the 15 finalists. In some ways I am most curious about Bad Blood: Secrets and Lies in a Silicon Valley Startup, “John Carreyrou’s tale of the rise and fall of Theranos, the blood-testing firm founded by Elizabeth Holmes.” Many, many really smart and respected people were taken in by Theranos and it would be useful to know how this came to pass. Adam Tooze’s book Crashed, an “exhaustive 700-page analysis of the global financial crisis, a decade on” also makes the list. Tooze points out that “the crisis laid the ground for the populist backlash obvious in the 2016 vote for Brexit in the UK and the election of Donald Trump in the US.” One might add, I suspect, the rise of the right in much of the EU.
(12 August 2018): “Americans Own Less Stuff, and That’s Reason to Be Nervous” Bloomberg.com
——–[Bloomberg Opinion by economist Tyler Cowen of George Mason University.] “Some social problems are blatantly obvious in daily life, while others are longer-term, more corrosive and perhaps mostly invisible. Lately I’ve been worrying about a problem of the latter kind: the erosion of personal ownership and what that will mean for our loyalties to traditional American concepts of capitalism and private property. The main culprits for the change are software and the internet. For instance, Amazon’s Kindle and other methods of online reading have revolutionized how Americans consume text. Fifteen years ago, people typically owned the books and magazines they were reading. Much less so now. . . . The change in our relationship with physical objects does not stop there. We used to buy DVDs or video cassettes; now viewers stream movies or TV shows with Netflix. . . . Music lovers used to buy compact discs; now Spotify and YouTube are more commonly used to hear our favorite tunes.” Then there are cars. “The great American teenage dream used to be to own your own car. That is dwindling in favor of urban living, greater reliance on mass transit, cycling, walking and, of course, ride-sharing services such as Uber and Lyft.”
********Cowen goes on to note, “Each of these changes is beneficial, yet I worry that Americans are, slowly but surely, losing their connection to the idea of private ownership. . . . We’re hardly at a point where American property has been abolished, but I am still nervous that we are finding ownership to be so inconvenient.” It seems like Cowen is expressing a thought that is somewhat akin to a change in the invisible handshake—social and historical forces that influence human behavior—that is driven by a change in the invisible hand—economic forces that influence human behavior.
********I’m not sure that the change Cowen notices, which is certainly real, is something to be concerned about, but it is interesting to think about. What he describes is largely a change from purchasing goods—tangible things that give off services—to purchasing services. If you buy a good, you are also buying a sequence—perhaps very long—of potential services, much more perhaps than you really want. (Will I ever again watch the DVDs of the Danish TV series “Forbrydelsen” that I own?) All this, I suppose, is just another example of the “Rent vs Buy” decision encountered in textbooks on finance. Ownership can certainly be a burden. When you buy a good, it is generally your problem when something goes wrong, but when you rent a good (buy a service), it is generally the problem of the rental and something goes wrong, it s the problem of the rentor when something goes wrong. In short, “he” who owns the good, owns the problem. What do you think, are you concerned about people moving to purchase fewer goods and more services on the whole?
********Ride sharing services Uber and Lyft have a position on the supply side of the market for auto-based transportation services. So the article “Uber and the False Hopes of the Sharing Economy” The New York Times, is of related interest. As it turns out, in New York City, approximately 80 percent of Uber drivers “bought cars for the purpose of making a living by driving.” So, in the future, especially in urban areas, fewer cars may be purchased but they will be used more intensively, ceteris paribus. But what is the optimum number of such service providers in, say, NYC? It depends upon what problem you are trying to solve. Learn more by reading “What’s the Right Number of Taxis (or Uber or Lyft Cars) in a City?” The New York Times.
May you have a good week!