334 (12 September 2018)

Welcome to week 334!  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.

(28 August 2018): How a Ruling on Insider Trading Could Affect the Chris Collins CaseThe New York Times

——–“Insider trading cases are sometimes as simple as a well-timed phone call warning an investor to bail on a stock ahead of impending bad news.  The indictment this month of Representative Chris Collins, a Republican representing a district near Buffalo, N.Y., his son Cameron Collins, and the father of Cameron Collins’s fiancée is a good reminder of that. . . . An insider trading violation does not require the source of the information trade on it.  The law requires only that the government show the information was given to others with the intention that they trade on it and that the tipper received a benefit, which can be something as simple as cash or a gift to family or friends.”

********The article goes on to summarize some recent rulings on insider trading that make it easier to demonstrate benefit, and then easier to secure insider trading convictions.  It will be interesting to see how things work out for Representative Collins et al.

(4 September 2018):James Mirrlees, Whose Tax Model Earned a Nobel, Dies at 82The New York Times

——–James Mirrlees, who shared the 1996 Nobel Prize in Economics with William Vickrey, died on August 29th at his home in Cambridge, England.  In his work “Mirrlees suggested that too many progressive taxes imposed at the highest income levels could discourage the wealthy from earning even more, reducing the revenue available to pay for government services and assist lower-income households.”  Although he had expected that “the rigorous analysis of income-taxation in the utilitarian manner to provide an argument for high tax rates” he found that an “approximately linear” (flat) tax schedule was more desirable.

********You can learn much more about James A. Mirrlees by consulting his Nobel Prize materials.

(6 September 2018):Rousseau, Marx and Nietzsche: The prophets of illiberal progressThe Economist

——–This brief is the sixth and last of the Philosophy Briefs on Liberal thinkers.  Encountered here are the ideas of “three anti-liberals: Jean-Jacques Rousseau, a superstar of the French Enlightenment; Karl Marx, a 19th-century German revolutionary communist; and Friedrich Nietzsche, 30 years Marx’s junior and one of philosophy’s great dissidents.  Each has a vast and distinct universe of ideas.  But all of them dismiss the liberal view of progress.  Liberals believe that things tend to get better. . . . And so liberals set out to define the conditions for progress to come about.  They believe that argument and free speech establish good ideas and propagate them.  They reject concentrations of power because dominant groups tend to abuse their privileges, oppressing others and subverting the common good.  And they affirm individual dignity, which means that nobody, however certain they are, can force others to give up their beliefs.  In their different ways Rousseau, Marx and Nietzsche rejected all these ideas.”

********In concluding the article, and the series, it is noted that, in contrast to the ideas of Rousseau, Marx, and Nietzsche, “Liberalism . . . does not believe it has all the answers.  That is possibly its greatest strength.”

(6 September 2018):The pros and cons of collaborationThe Economist

********This article take a brief look at collaboration (working in teams) that is mindful of its pro (the wisdom of crowds) and its con (groupthink).  In so doing it discusses some of the recent literature on the subject—one article and some books.  It turns out that intermittent collaboration tends to perform better on average than going it alone or continual collaboration.  And it is noted that “Close teamwork may be vital in the lower reaches of a hierarchy, but at the  top someone has to make a decision.”  Finally, co-leadership structures tend not to work well, as it “creates uncertainty over who is really in charge.”

********This seems like a good place to mention Farsighted: How We Make the Decisions That Matter the Most, by Steven Johnson, which is [SR] reviewed in The Wall Street Journal.  As the reviewer notes, “Mr. Johnson is explicitly focused on real-life decisions that (ideally) involve serious deliberation . . . He is less interested in the abstract experiments . . . that he says constitute the foundation of behavioral economics.”  Interesting to me was the distinction made between shared and unshared information.  In designing a process to elicit information, town halls tend to elicit shared information.  As a result, “it is important to design a process that exposes ‘unshared information’—by meeting individually with stakeholders,” too.

(6 September 2018):The fight against illicit fishing of the oceans is moving into spaceThe Economist

********This is a brief survey of Illicit, Unreported, and Unregulated (IUU) fishing and some of the technological means being adopted to combat it.  Fitting large ships and small boats with radio beacons and expanding the satellite network would help develop the information necessary to detect IUU fishing and apprehend them in port.  These innovations could make IUU fishing a thing of the past, at least where “the will to enforce the rules exist.”  The National Oceanic and Atmospheric Administration is a source of additional information about IUU fishing.

(7 September 2018):Amazon’s Antitrust Antagonist Has a Breakthrough IdeaThe New York Times

********This is another article, mostly biographical, on Lina Khan, the author of “Amazon’s Antitrust Paradox,” and the influence of her ideas.  As the article notes, her paper “has rocked the antitrust establishment, and is making an unlikely celebrity of Ms. Khan in the corridors of Washington.”  What’s new about this article is the attention it draws to hearings by the Federal Trade Commission, starting on September 13th at the Georgetown University Law Center.  These hearings, “the first of their type since 1995,” will consider “whether a changing economy requires changing enforcement attitudes.”  The Hearings are entitled “Competition and Consumer Protection in the 21st Century.”  At its link you can find the Agenda and information about Event Speakers, and much more.  At another link, there is a statement that “The event will be webcast live” but I see no indication of how to access the webcast.  This could be an important event.

(7 September 2018): The Consolidation of the American HarvestBloomberg.com

——–“America’s heartland has a sameness that didn’t exist a generation ago. . . . As global markets have grown, the desire and need for diverse local production has declined. . . . Since the mid-1990s, around the time that genetically modified crops became prevalent in U.S. agriculture, the diversity of American fields has decreased.  It’s not just the GMOs, although they had aided the spread of corn and soybeans.  The rise of ethanol and farm exports to China—as well as cheaper transportation costs, increasing concentration of livestock feedlots, and climate change—have each played a role.”

********This article is accompanied by a series of figures that dramatically indicate how some crops are expanding, and where, and some are not.  Acres planted in corn and soybeans are expanding, in some places dramatically, while wheat is contracting, almost everywhere; there are dramatic declines in cotton acreage in traditional areas, with expansion in north Texas and western Oklahoma.  Driving some of these changes has been the expansion of corn for ethanol production, the consequence of the invisible foot—legal and political factors—and changing international trade patterns, especially with regard to China.  I would love to see representations of this data at the county level.

********This is the place to reference another article from that I have seen for the past six weeks or so: “Here’s How America Uses Its LandBloomberg.com   This graphically-rich article uses information from the USDA and other sources to look at six types of land usage in the 48 contiguous states.  The uses are: Pasture/range, Forest, Cropland, Special Use, Miscellaneous, and Urban.  Each use is color coded which is important to remember as you make your way through the article.  I needed to work my way through the content slowly as it is put together in an unusual way.  The very first graph, which shows all of the uses imposed upon the map of the U.S., may be the most informative.  Now if there was just some way of integrating the changing land use, as shown in “Consolidation” with the predominant use shown in “Here’s How.”

********The USDA information on Major Land Uses is available online.  There is a 69-page report “Major Uses of Land in the United States, 2012” available as a  pdf.

(10 September 2018):A Forensic Accounting Expert Explains How Companies Trick InvestorsBloomberg.com

********This is an episode of Odd Lots, with Tracy Alloway and Joe Weisenthal.  In this week’s 36-minute podcast they speak with Howard Schilit, a forensic accounting expert who is the author of Financial Shenanigans: How To Detect Accounting Gimmicks and Fraud in Financial Reports, now in its 4th edition.  In this engaging and enlightening interview, Schilit indicates that “Companies have all kinds of discretion in how they recognize revenue and costs.  Some of this is legit.  Some of this is fraud.”  Among the topics discussed are “the various techniques companies use to disguise their earnings, how accounting rules have failed to keep up with changing times, and what investors can do to spot red flags.”  Of contemporary interest is Schilit’s discussion, starting at 27 minutes, of President Trump’s words about possibly doing away with quarterly corporate financial reports.  Schilit is not a fan and  provides some suggestions about how to make those reports more meaningful.

********This is one of those podcasts that does not lend itself to multitasking.  There are many thoughtful questions and equally thoughtful answers.  What stood out for me was the power of a story.  A good story, evidently, has the ability the shut off the ability to think critically.

(11 September 2018):American Eating Habits Are Changing Faster than Fast Food Can Keep UpBloomberg.com

——–According to researcher NPD Group Inc., per-person restaurant visits fell to a “28-year low in 2018 . . . Restaurants are getting dinged by the convenience of Netflix, the advent of pre-made meals, the spread of online grocery delivery, plus crushing student debt and a focus on healthy eating.”  Now “Eighty-two percent of American meals are prepared at home—more than were cooked 10 years ago . . . The latest peak in restaurant-going was in 2000, when the average American dined out 216 times a year.  that figure fell to 185 for the year ended in February.”  Although chains like McDonalds Corp. are reporting rising U.S. sales, the increases “have been driven by price hikes, not more customers.  Traffic for the industry was down 1.1 percent in July, the 29th straight month of declines.

********The article contains some telling graphs.  One showing the behavior of Restaurant meals per capita, which has declined continuously since 2008, and another showing “Restaurant inflation” vs. “Food at home inflation.”  As the article notes, the “gap” between the two is growing, i.e., the relative price of eating out in comparison to eating in is increasing.

(11 September 2018):The Secret Drug Pricing System Middlemen Use to Rake in MillionsBloomberg.com

********Much of the discussion of pharmaceutical prices seem to revolve around the notion that manufacturer profits must be “high” to ensure the research costs surrounding new product development.  This article provides another perspective, by looking at “spread” between Medicaid program costs (on the high side) and pharmacy costs (on the low side), which tends to be dramatic.  This piece of investigative journalism—check out the notes on Methodology at the end of the article—helped me formalize what it is that is attracting me to Bloomberg’s approach to the news.  It made me reach for Democracy’s Detectives: The Economics of Investigative Journalism, which is now next to the top of my reading list.  What’s at the top?  The World in a Grain: The Story of Sand and How It Transformed Civilization.

May you have a good week!

Bruce

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