[The Invisible Forces Weekly: Economics with a Broader View] 348 (19 December 2018)
Welcome to week 348! 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.
This seems like a good time to call attention to Bloomberg Opinion writer Barry Ritholtz. Six days a week, I believe, he creates an email (post) on a variety of topics that he is “reading on the train.” It is somewhat along the lines of TIF Weekly, but much shorter—usually one sentence and a link per article—and without a focus on the invisible forces. Still, I find that he reads broadly and has interests that touch upon mine. Perhaps they will touch upon yours, too. For an example, take a look at his December 15th post “Safecrackers, quant funds and machine politics” Bloomberg.com. Take a look and if you are interested, you can Sign up here! for his email.
(April 2018): “See No Evil” Logic
********This article explores some of the complexities of product supply chains, taking off from a claim by the minibar chocolate-maker Chocolonely that it aspired to be the first company to market a “chocolate bar produced without labor exploitation.” The firm was sued by Swiss chocolatier Bellissimo in 2007, “allegedly claiming that ‘slave-free chocolate is impossible to produce.’” Ultimately Miriam Posner, the author of “See No Evil,” was led to ask: “What if it is truly impossible to get a handle on the entirety of a supply chain?” This article provides a glimpse of how difficult it is. In the first section of the article—up to “A Network of Waterway”—Posner sets out a number of familiar and valuable resources for learning more about global supply chains. Although I am still partial to Marc Levinson’s The Box, I am also intrigued by Deborah Cowen’s The Deadly Life of Logistics.
********A loosely related article to the above is “Apple Computers Used to Be Built in the U.S. It Was a Mess” The New York Times. In the 1980s Apple tried to manufacture the Macintosh in the Bay area but things just did not work. The same thing happened after Steve Jobs left to establish Next Inc.—U.S. production did not work. When he later returned to head up Apple, he had learned his lesson. Computers would be manufactured in China. It was then that “he hired Tim Cook [Apple’s current CEO] as Apple’s senior vice president for worldwide operations. Mr. Cook had mastered the art of global manufacturing supply chains, first as IBM’s personal computer business and then at Compaq Computer.” It may be impossible to get a complete handle on a global supply chain, but one can get a handle on more of it. Maybe that is exactly what is needed to be successful.
(10 December 2018): “One Drug’s $2.5 Billion Journey from Lab to Market” Bloomberg,com
********This is a 24-minute podcast exploring the long and tortured path from path-breaking idea to an approved drug. Most research projects never result in a viable drug, much less a profitable one. The podcast retails the 16-year journey of one drug, while although viable, is not yet profitable.
(12 December 2018): [SR] “Plastic Water Bottles, Which Enabled a Drinks Boom, Now Threaten a Crisis” The Wall Street Journal
——–“A consumer backlash against disposable plastic plus new government mandates and bans . . . have the world’s biggest bottled-water makers scrambling to find alternatives. . . . There’s a big problem. The industry has tried and failed for years to make a better bottle.” Up until now “the industry has relied on a recycling method that washes, chops and melts waste plastic to create resin” but most “of it gets turned into clothes and carpets since plastic loses some of tis structural properties and becomes discolored with each recycle, diminishing the appeal to bottled-water makers.” However, Montreal’s Loop Industries Inc. has “developed a process to break plastic into its base ingredients” and doesn’t use heat or pressure, so contaminants don’t melt into the plastic and can be filtered out. Loop worked with bottled-water producer Danone to test Loop’s process, which was a success. “Loop has also signed supply deals with Pepsi and Coca-Cola’s European bottler.”
********The Loop technology looks promising, even thought the WSJ says its stock, listed on Nasdaq, is down 50% this year. The important distinction between what Loop does and what other recycling technologies do is the difference between “downcycling” and “upcycling,” according to an article in Forbes. Downcycling yields “a less pristine and often contaminated version of the original.” I.e., the quality of the plastic degrades with each successive recycle. But with upcycling waste plastic is deconstructed “into its basic chemical building blocks” after which impurities can be removed and “food-grade PET—the highest possible quality” can be made. The Forbes article includes an informative interview with environmental entrepreneur Daniel Solomita, who spent years working on nylon recovered from a landfill in South Carolina working to clean it and help put “the material back into the marketplace.” He noted: “It occurred to me very early on in that venture that reusing material was so much more environmentally and economically efficient that the wasteful linear economic model.”
(13 December 2018): “As More Cars Plug In, Utilities and Makers Juggle Ways to Power Them” The New York Times
——–Currently utilities “must not only supply the huge amounts of electricity that modern car factories consume, but also fuel the increasing number of electric vehicles coming out of them. If that electricity isn’t generated with minimal carbon emissions and at a reasonable cost, the advantages of electric cars are diminished. And because most owners charge their vehicle in the early evening when they get home from work, demand peaks can be a significant problem. Thus, automakers and utilities are again working hand in hand to ensure a good supply of clean, inexpensive electricity—while developing strategies for charging that don’t overload circuits at peak periods—through improved efficiency, strategic charging and a greater reliance on renewable energy sources.”
********I have wondered about the impact on utilities of much more extensive use of electricity as an automotive energy source. This article spells out some of the considerations, especially the role that smart charging will play in “fueling” electric vehicles. Software for such systems will determine “the best time to charge, considering the car owner’s preferences, how the electricity is being generated and pricing signals from the electric grid.” By judicious preference expression, one can avoid contributing to peak energy use for the grid as a whole, thereby reducing the need for additional power plants. Smart regulation and legislation, of course, could go a long way toward facilitating such developments.
(14 December 2018): “Homicides have fallen dramatically in Honduras. So why are people still fleeing?” The Los Angeles Times
********This article provides a useful look at emigration from Honduras and the circumstances there that are “pushing” people from the country. In addition, it provides a glimpse at the objectives of U.S. policy and aid to Honduras. Less than a decade ago Honduras was the homicide capital of the world. Since then, “thanks in part to hundreds of millions of dollars that the United States has spent to help Honduras fight crime,” homicide rates have fallen substantially, although they are still “nearly nine times that of the United States.” U.S. aid has flowed “based on a simple hope: If the streets were safer, fewer people would migrate north. But the reality has provided to much more complicated.” In particular, the economy “is a shambles, with nearly two-thirds of the labor force either unemployed or underemployed. Endemic corruption and political instability have also been major factors.” In a 2018 poll by a Honduran think tank, it was found that “among those who had a family member leave in the last four years, 83% said the reason was economic insecurity, compared with 11% who said it was violence.” Still, the largest share of U.S. aid “has gone to crime fighting.”
(14 December 2018): “Bitcoin ATMs May Be Used to Launder Money” Bloomberg Businessweek
——–Bitcoin, and other “crypto currencies,” have been on a downward spiral of late, but they are still an asset of interest. One reason for that interest is that it is an almost perfect vehicle “for dirty money. A Bitcoin bought at a machine in Harlem would be instantaneously deposited into a digital wallet, which could be owned by the person standing at the machine, a drug cartel in Colombia, or a ransomware hacker.” ATM charges for Bitcoin purchasers at ATMs owned by Cottonwood Vending LLC can cost “19 percent or more in transaction fees. (It sounds like a lot until you consider that the going rate for clean cash in the criminal underworld is about 30 percent.) To date, U.S. regulators haven’t had the interest or resources to investigate BTMs, so it’s more or less an open secret that they’re used by drug dealers and other criminals.”
********The article is a valuable exploration of how some ATMs can be used to launder money using Bitcoin. In fact, it provides a six-step “guide to cleaning cash.” A sobering look at money laundering in the digital age. In Asheville, North Carolina, there are at least two Bitcoin ATMs.
(14 December 2018): “Economics: The Discipline That Refuses to Change” The Atlantic
——–In the 1970s psychologists Daniel Kahneman and Amos Tversky showed that “the actions of human beings deviate from . . . ironclad rationality . . . in all sorts of ways: People make systematic errors of judgment . . . and . . . are also more generous and cooperative than they’re given credit for. These insights let to the founding of a new field, behavioral economics, which became a household name 10 years ago . . . But despite the fanfare” behavioral economics at many colleges has made few inroads into undergraduate education. “Not only is the study of behavioral economics largely optional, but the standard textbooks used by many college students make limited references to behavioral breakthroughs.” Although making “behavioral economics compulsory isn’t a cure-all for the ills of the economic discipline,” e.g., its excessive mathematization based upon a caricature of human concerns, “it would go a long way in encouraging students to think about actual human beings.” If there is a deeper lesson “to come out of the behavioral revolution, it’s that the vagaries of human behavior make it very difficult to model as a pure science, and economists have a lot to learn from other disciplines, including other social sciences and the humanities.”
********It is, in part, because of concerns expressed in the article above that projects like The CORE Project discussed in “The re-education of Economics 101” Quartz are underway. I say “in part” because there is much more at work than behavioral economics in the current rethinking of economics, especially at the introductory level. Some of it is a reaction to hyper-mathematization in the discipline as exemplified in the French-born Post-autistic economics movement. An absence of relevance seems at the heart of the UK-born Post-Crash Economics Society (see more about the group and the book The Econocracy in The Guardian.) These two movements stand out to me, but there are more. The Union of Radical Political Economics has been promulgating alternative perspectives in economics since 1968. To my mind, what unites these movements and their adherents is a desire for an economics curriculum that is (1) more relevant to their personal experiences and the societal problem they would like to address, and (2) more willing to embrace a broader set of perspectives in getting at them, more generally known as methodological pluralism (see the Wikipedia entry on epistemological pluralism for specific references to economics.
********It is a reasonable to ask, “How does TIF Weekly fit into all of this?” By seeking to provide “Economics with a Broader View,” it is sympathetic to those seeking to better understand the world as it is and how it will be as a result of our actions and interactions with the environment, broadly considered. I have always thought that the story of the blind men and the elephant is deep and appropriate. In my thinking it proclaims that “everyone has a piece of the truth, but no one has all of it.” Surely that is true of methodologies, too.
(18 December 2018): “These workers quite their jobs without two-weeks notice. Here’s what they did instead” The Washington Post
********This is an article about the increase in “ghosting,” in effect, walking away from a job without notice. (As of this moment, 586 readers have commented on it.) As the article notes, “Once taken for granted as a professional courtesy, the two-weeks notice standard is losing relevance in an economy where practically everyone is hiring.” For more information, check out the four-minute podcast about ghosting on Marketplace and read about the origin of the term in the context of intimate relationships at Wikipedia. I found the related Quartz article “Americans are enjoying the irony of employers being ‘ghosted’” to be thought provoking.
May you have a good week!