Welcome to week 338! 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.
(1 October 2018): “Review of American Prison: A Reporter’s Undercover Journey into the Business of Punishment, by Shane Bauer” The New York Times
——–In 2016 Shane Bauer wrote “a 35,000-word exposé that ran in Mother Jones . . . an article that immediately became one of the most celebrated achievements in that venerable publication’s recent renaissance.” American Prison “reprises that page-turning narrative, and adds not only the fascinating back story of CCA [Corrections Corporation of America, now CoreCivic], the nation’s first private prison company, but also an eye-opening examination of the history of corrections as a profit-making enterprise, of which the advent of the private prisons that now house 8 percent of American inmates is only the latest chapter.”
********This book has “sparked comparisons” to Newjack, by Ted Conover, “who spent a year in the late 1990s working at New York’s infamous Sing Sing prison to better understand what it’s like to pursue a career as a professional jailer. But this is not what Bauer is writing about, because a career is not what a company like CCA offers its employees.” The employees at Sing Sing could really have a career, with extensive initial and regular training, good pay, and benefits, whereas the workers at CCA get little training, low pay, and don’t stay long. It is hard to avoid the conclusion that in the drive to lower costs people have simple forgotten (or do not care) about the resulting reduction in quality.
********Here is the link to American Prison. You can learn more about CCA, now known as CoreCivic, here. I found the Facility Locater to be interesting. North Carolina has no CoreCivic facilities, like bordering states South Carolina and Virginia. However, Georgia has 6 facilities and Tennessee 9.
(8 October 2018): “Nobel in economics goes to two Americans for studying climate change and sustainable growth” The Los Angeles Times
********The Nobel Memorial Prize in Economic Sciences for 2018 was awarded to William Nordhaus of Yale University and Paul Romer of New York University. This event has received wide coverage—there are many good articles on it. I have chosen this one because it quotes David Warsh, the former reporter for The Boston Globe who has long reported on the leading lights of economics, including a book on the work of Paul Romer, and continues to write his weekly blog Economic Principals. When asked if the Nobel Committee was sending a message by awarding the prize to Nordhaus and Rome “at a time of escalating alarm over climate change” he replied clearly: “Darn right they were sending a message.” I’m looking forward to learning in more detail Warsh’s thoughts on the award, which will have uncommon depth and relevance.
********Probably the best source of materials on this year’s awards is provided at the Nobel Prize website. There you will see the citations for both laureates:
The Sveriges Riksbank Prize in Economic Sciences in Memory of Alfred Nobel 2018 was divided equally between William D. Nordhaus “for integrating climate change into long-run macroeconomic analysis” and Paul M. Romer “for integrating technological innovations into long-run macroeconomic analysis.
In brief, their work looks at different aspects of “long-run macroeconomic analysis.” Nordhaus examines the role of climate and Romer the role of ideas. The Nobel Committee seems to be pointing to the potential synergy between their works. To learn more about their contributions, use the drop-down menu of the Nobel Prize website to navigate to: a Summary; the Prize announcement; the Press release; Advanced information; and Popular information. The last item on the list includes “Popular science background: Integrating nature and knowledge into economics” that looks accessible; it is eight pages long.
********During the week I finished reading The World in a Grain: The Story of Sand and How It Transformed Civilization, by Vince Beiser. I wanted to review the book for TIF Weekly, but thought maybe it had already been done well enough—it had. NPR has a nice, brief review by Genevieve Valentine. While looking for a review it occurred to me that Grain fits nicely in the narrative being created around this year’s awarding of the Nobel Prize in Economics.
********Grain examines the central role of sand in the development of the modern “built world” and how sand mining has resulted in environmental degradation. Basically, sand is used in the roads we drive on, the windows we look through, and the buildings we live and work in. And all that sand, which is definitely not homogeneous, comes from some place—river beds, farm lands, and ocean floors—which are the worse for their extraction. The stories that Beiser tells take us to Spruce Pine, North Carolina (the source of perhaps the world’s purest crystalline sand—essential for our digital age), Chippewa County, Wisconsin (the source of an especially important sand used in fracking), Dubai (where islands made of sand are sold to the ultra-wealthy), and the South China Sea (where islands made of sand extend Chinese military power). As the book winds down, I was left with the clear sense of the fragility of the world we have built: roads that deteriorate, windows that break, and concrete the crumbles away as reinforcing rods rust.
(8 October 2018): [SR] “The U.S.-China Trade Battles Spawns a New Era of Tariff Dodges” The Wall Street Journal
——–“Every product imported into the U.S. carries a 10-digit designation called an HTS code, of which there are 18,926 in all. Like a taxonomic version of Noah’s Ark, the code provides a common language to bridge disparate markets and identify products in all their variety. In a world of increasing tariffs, the code has another function: evading those levies. The business of code-fudging is expanding in step with tariff increases, undermining U.S. efforts to shield American business from foreign competition, according to importers, customs officials, trade attorneys and shipping brokers. As trade conflict grows between the two largest economies, these professionals say, code misclassification is starting to compete with transshipments—the rerouting of goods through third countries—as a way to duck tariffs.”
********The article provides examples primarily drawn from the world of plywood. “The U.S. coding system called HTS—for Harmonized Tariff Schedule—contains 88 separate plywood codes, differentiating by types of wood and thickness variations down to the millimeter.” You can peruse the current HTS here. This apparatus, of course, wasn’t just created—it dates back to 1989—it is just that some of the duties have recently changed, so there is now an incentive to reclassify products so that they are subject to lower rates. In effect, pick-and-choose tariffs encourage pick-and-choose product reclassification.
(9 October 2018): “Ominous UN Climate Report May Be Good News for One Industry” Bloomberg.com
********The release of the U.N. Special Climate Report Global Warming of 1.5℃ has given rise to reaction by many, including the business press; the Report has a 34-page Summary for Policymakers. This article points to one industry that will have to play a large part in any meaningful attempt to address climate change: carbon capture and storage (CCS). Regarding that, the Report noted that “CCS . . . will be needed for ‘all pathways’ to limit global warming to 1.5 degrees Celsius (2.7 Fahrenheit) . . . Their conclusion is welcome news for big energy companies led by Royal Dutch Shell Plc, Statoil ASA and Total SA, which are studying how to deploy CCS to safeguard the emissions they produce from oil and gas reservoirs.”
(9 October 2018): [SR] “Thousands of Southerners Planted Trees for Retirement. It Didn’t Work” The Wall Street Journal
——–In the “depths of the 1980s farm crisis, when prices for agricultural commodities plunged, the Reagan administration launched the Conservation Reserve Program. Starting in 1986, it promised farmers annual payments of about $30 to $50 for each acre they planted with trees or grasses. Many seized the offer. By 1994, more than 2.2 million acres of farmland in the South had been converted to pine plantation, much of it in Mississippi, Alabama and Georgia.” Thirty years later a “glut of timber has piled up in the Southeast. There are far more ready-to-cut trees than the region’s mills can saw or pulp. The surfeit has crushed timber prices in Mississippi, Alabama and several other states.” This development has “been tough for the individuals and families who own much of the South’s forestland, and who had banked on its operating as a college fund or retirement account. . . . Many of the owners were counting on forests as a long-term investment that could be replenished and passed on to heirs.”
********A nice piece, too few of which I have seen in the WSJ in recent years. It provides a good example of the role of the legal and political factors in economic affairs. I do wonder if the government or individuals took into consideration prospective price declines when they made their decisions to plant. Although one farmer planting trees will have, for all practical purposes, no effect on market prices, millions of farmers—it is estimated that there are “more than six million owners of at least 10 wooded acres” in the South—will definitely have an effect on market prices.
May you have a good week!